IMF says Spain taking right steps towards stability

Spain is taking the right measures
for economic stability, the head of the International Monetary Fund has said.

Dominique Strauss-Kahn said he was
“confident” Spain’s economy would recover and called on all Spaniards to back
the government’s austerity work.

He was speaking after a meeting in
Madrid with Spanish Prime Minister Jose Luis Rodriguez Zapatero.

Mr Zapatero had earlier denied his
government was seeking an IMF bailout, but markets have been nervous.

Mr Zapatero said on Thursday that
Spain’s economy was solid and solvent, and the visit by Dominique Strauss-Kahn
was a scheduled one.

Mr Strauss-Kahn said all the
measures being put in place by the Spanish government were “clearly being done
for the benefit
of the economy”.

“I am really confident in the
medium and long-term prospects for the Spanish economy, providing the efforts
that have to be made will be made,” he added.

He specifically praised continuing
efforts to liberalise the Spanish labour market, saying they went in “the right
direction”.

Mr Zapatero said that during the
meeting he had conveyed to Mr Strauss-Kahn “the determination of the Spanish
government to implement and to make effective every single one of these reforms
that we have launched”.

Mr Zapatero’s government recently
introduced a package of spending cuts and a reform of the labour market in an
attempt to persuade nervous financial markets that Spain’s finances are under
control.

However, that’s a difficult task,
as after the crisis in Greece, the financial markets have been concerned that
Spain could be the next country to require outside financial assistance.

As a result, Spain is having to pay
record rates to sell its debt, and this week a senior banker revealed that
Spanish financial institutions are struggling to get funding on international
markets.

Spain
is now promising to publish the results of what are known as “stress tests” on its
banks, to prove that any fears of their failure are unfounded.

The
country is still reeling from the collapse of the construction sector, has a
budget deficit of 11%, and one in five workers is unemployed.

To
help reduce the jobless count, the Spanish government wishes to liberalise
labour laws that currently deter Spanish firms from taking on full-time staff
because of the difficulty of making redundancies.

However, this has already
faced strong opposition from unions, who are threatening to hold a general
strike in September.

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