Spain makes progress, but huge re­form needed: OECD

The Pak Banker - - International3 -

PARIS: Spain has good prospects of beat­ing its re­ces­sion cri­sis and over­com­ing deep mar­ket dis­trust of its debt bur­den, but faces a huge task in re­form­ing out­dated struc­tures, the OECD said on Mon­day.

Spain, in the eye of fi­nan­cial mar­kets which are shun­ning its debt bonds, has done much right, is fight­ing the cri­sis well, but must re­form its labour leg­is­la­tion and em­ploy­ment prac­tices, the Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and Devel­op­ment said.

The econ­omy, which stalled in the third quar­ter af­ter edg­ing out of deep re­ces­sion, is now set for "sub­dued" growth but the blows of the last two years will leave "last­ing" scars and the un­em­ploy­ment rate, now about 20 per­cent, will re­main among the high­est in the Euro­pean Union, the OECD es­ti­mated.

This reg­u­lar coun­try as­sess­ment is likely to be read in par­tic­u­lar de­tail on fi­nan­cial mar­kets which see Por­tu­gal and Spain as be­ing at high risk of even­tu­ally need­ing a debt res­cue, as has al­ready been the case for Greece and Ire­land.

The sov­er­eign debt cri­sis in the eu­ro­zone took a new turn at the end of the last week when Euro­pean Union lead­ers agreed to ad­just a ba­sic treaty to cre­ate a per­ma­nent res­cue fund, mark­ing a small but im­por­tant step to­wards new EU-eu­ro­zone ar­chi­tec­ture.

But sev­eral an­a­lysts said the lead­ers had again spo­ken too much in gen­eral terms, and not pro­vided enough spe­cific de­tail to re­duce un­cer­tainty for in­vestors.

It was in this con­text that the OECD re­port on Spain re­ferred to a prob­lem of a lack of con­fi­dence un­der­min­ing poli­cies by the Span­ish govern­ment to cor­rect pub­lic fi­nances.

While giv­ing good marks to the Span­ish govern­ment's man­age­ment, it warned that the cri­sis laid bare fun­da­men­tal eco­nomic prob­lems, es­ti­mat­ing that more than half of the de­te­ri­o­ra­tion of pub­lic fi­nances was struc­tural and could be tack­led only by re­forms. -Afp

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