The European Union has been heaping the criticism on Spain vis-à-vis the way it has been dealing with savings banks and tax policy. But Spain has not taken this lying down. Indeed, according to a Bloomberg article it has been “persuading the EU to water down judgments issued as part of a new economic-policing system.”
These recommendations are to be issued tomorrow by EU finance ministers in Brussels. In them, Spain is being pushed to “monitor closely” the “reorganization of savings banks, softening an earlier plea to “reinforce” the restructuring.”
Looking at Spain it is clear central European authorities are facing obstacles with “putting their stamp on national economic policies, even as they struggle to contain the sovereign-debt crisis.”
National Interests
According to chief Euro-area economist at BNP Paribas SA, London, Ken Wattret, “national interests tend to dominate the debate. Governments are not doing a good job convincing markets that they will do whatever is necessary to stabilize the situation.”
When it comes to Spain, the original doubts the EU was having vis-à-vis a “savings-bank consolidation were scaled back.” Instead, Spain received “praise for the law’s ‘positive consequences’ for the banks’ balance sheets.” At that point Europe surrendered its call for a reduction in its social-security premiums in an attempt to “make hiring more attractive.” Instead they put together an appeal to “improve the efficiency of the tax system.”
Elena Salgado, Spain’s Minister for Economy, had engaged in substantial lobbying for this. She claimed that reduced premiums would “undermine the pension system and an offsetting value-added tax increase would sting consumer spending.”
Further, the EU was convinced by France and Spain to backtrack a bit on its criticisms of the “economic growth assumptions to be used in their 2012 budgets, upgrading them to ‘favorable’ from ‘too favorable’.”
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