By Anastasia Barysheva and Polina Chernitsa
Spain’s government has approved the 2013 budget, which envisages cutting budget deficit by 50 billion euros. At the same time the authorities have made some concessions to the population following numerous mass protests. On Friday, markets responded positively on the news from Madrid but experts still warn against unnecessary optimism.
On Thursday, presenting the budget the Spanish government said that 2013 would be the last year of recession. Both experts and investors were waiting for this statement because Spain is the second country after Greece which is now going through the serious economic crisis. The planned budget cuts worth 50 billion euros meet the demands of the European regulators. The government of Mariano Rajoy also announced the creation of an “independent budget governing body”.
It is interesting that right centrists decided not to cut pensions and state subsidies and even announced plans to slightly increase them. The government does not plan to up taxes either although earlier it discussed it as a necessary measure for the budget consolidation. Perhaps, the government made such concessions to the citizens after numerous protests campaigns. In the beginning of the week enraged protesters were about to take parliament’s building by storm. Meanwhile the Spanish authorities are yet to address deep structural problems, economist Igor Nikolayev says.
“The current measures, especially such inconsistent ones, cannot reverse the growing crisis trends. On the one hand they are increasing social payments on the other hand they are trying to save money. The main issue is the search for money to patch another hole. Until the European government, not only of the troubled countries, pay attention to what is going on in the real economy, there will be no positive changes with the employment and labor productivity. It is enough to take a look at the current unemployment rate.”
Currently in Spain every fourth citizen may is unemployed, which is the worst indicator over the last decades. In France the number of unemployed has exceeded 3 million people, which is the historical maximum of the 1998 crisis. Francois Hollande’s loud statements that under the Socialists the country will feel the real changes still sound more like a bad joke. When he came to power the new French leader promised to put an end to the policy of radical cost cuts but since then nothing has been done expect for populist moves and the second economy of the UE is likely to face the recession.
By the way, Standard & Poor’s has already announced the beginning of the recession all over the euro-zone. In an interview with the “Voice of Russia”, director of the French School of Social Sciences Jacques Sapir said that he did not believe that the euro-zone would manage to keep its current form.
“As for the future of the euro-zone I am pessimist because it will be very difficult for its current line up to go through the coming winter, let alone 2013. It does not meet that the EU will die. The commonwealth will go through the period of reforms and continue the development. The main question is how to develop the economy. If we continue to carry out the policy of cost reduction it will definitely lead to long term recession for 4-6 years. The political weight of the EU on the international arena will decrease which in its turn will lead to numerous crises within the EU.”
The European authorities continue to look for the way out of the crisis using monetary methods: cutting state costs, providing loans and restructuring debts. Greece, which budget problems triggered the euro-zone crisis has been living on such “artificial nutrition” for several years. During this period there have been constant speculations about Greece’s possible withdrawal from the currency union as well as about the coming domino effect which affect other troubled countries – Spain, Italy, Portugal and their main creditors Germany and France. The EU leaders are continuing to hold summits on rescuing the euro-zone. The next summit will be held in early October. But so far there has been no success in solving the deep structural problems of the euro-zone.