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THE ECONOMIC CRISES IN SPAIN 2012


To: The Vice President of the Spain Government Mrs. Soraya Sáenz de Santamaría

From: Athinarayanan Sanjeevraja 

Date: April 18, 2012. 

RE: The economic crises in Spain 

Suggestion: Good Morning Mrs. Vice President. Of course, this is my first inscription to Spain Government. Financial Times, London articled on April 12, 2012 that “Spain needs pre-emptive action”. It addressed three main problems such as the budget, the banking sector and the labour market. The task is an arduous but it is not impossible because Spain has proven itself competent of economic reform and financial restructuring. If I am not mistaken, the country current account deficit was 10 percent GDP in 2008. The current account deficit descended to 3.7 percent in 2011. Spain has adjusted its current account deficit more than 6 pp of GDP at a spectacular space in three years. The significance of other economic reforms is such as reducing the budget deficit and labour market reforms to increase the country future economic growth

As far as the Spain financial structure reform, it is not adequate to make credit flow again. The Government has to superfluous restructure the financial system so that banks can generate healthy profit and be adequately solid to meet demand. It is my judgment that credit will not enhance until the solvent demand boosts. So it is indispensible to generate solvent credit demand and to ensure that solid banking system can respond to such demand. I think financial restructuring still remains much to do, not only to continue to repair the effects on the banking system of global financial crises but also to give a framework to combat future financial crises.  I think, the biggest problem Spain has its unemployment.  The labour market reform has also introduced in February 2012.  I hope that labour market reform can bring about the lasting, future oriented turnaround for Spain. I must tell you that Spain put huge effort so far but the country is improbable to see the prompt recovery in the Spanish economy. But Ireland was in severe recession in 2009-2010. But Ireland started growing again in 2011 due to more market based economic reform and more business friendly tax structure played a huge role of the Irish economy.

I’m going to conclude with a few words, Spain is in EU membership and as I believe EU membership will assist Spain overcoming the crises. EU membership has assisted during the global financial crises such as the interest rate cuts, the unlimited supply of liquidity, ECB bond purchases and three year refinancing operations are most beneficial for Spain. I hope that Spain will overcome all the problems in the short term with help of EU membership. 

Thank you for attention. 


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