IMF gives Spain pat on back

THOUGH Spain is not out of the woods yet as far as the economic crisis is concerned, the International Monetary Fund (IMF) has congratulated the country for the reforms it carried out.

“Spain is the only country in the Eurozone whose growth prognosis we have revised up. It is a country where the reforms, the effort and the sacrifices made by the people are bearing fruit,” said Managing Director of the International Monetary Fund (IMF) Christine Lagarde talking to the Spanish media at the 2014 Annual IMF Meeting in Washington DC.

However, Spain still faces risks, not just because of its high unemployment levels, but because there is a 35 to 40 per cent chance of the Euro area going into another recession.

“The next sign we want to see is unemployment going down,” said Lagarde. “And salaries going up?” asked a journalist, to which she replied: “That would also be great.” However, she did not specify if the IMF thinks salaries should be increased after years of cutbacks to strengthen consumption and recovery, an opinion defended by the International Labour Organisation and the Organisation for Economic Cooperation and Development .

While Spain has started to create employment, substituting the 3.5 million jobs lost in the midst of the crisis will not happen overnight and both the Spanish Government and the IMF estimate that unemployment levels in 2015 will be above 23 per cent. This means that one in every four people in the economically active population will be out of a job.

The growth prognosis for Spain could be wrong though, taking into consideration the risks facing its partners in the Eurozone. “We have warned against the 35 to 40 per cent risk of Europe going into another recession. We are not saying the Euro area is indeed headed for another recession, but it could happen if we do not do anything,” said Lagarde, meaning that countries running a surplus like Germany should invest more and that countries showing a deficit must effect reforms.

German Federal Finance Minister Wolfgang Schäuble said at a round table that his country must increase its investments, but emphasised that “European growth must not be achieved signing checks.”