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José Luis Álvarez, Professor of Economics and Business Administration, University of Navarra, Spain School

A necessary evil

Thu, 13 May 2010 10:28:39 +0000 Published in El Economista (Madrid)

The measures announced yesterday by Prime Minister Rodríguez Zapatero to cut back on the public expense came to certify a reality that, incomprehensibly, some people were still reluctant to accept. The example of Greece should have served as a lesson for us to anticipate the adoption of measures that, otherwise, would be imposed on us sooner or later.

As much as we do not like it, the Spanish Economics needs hard, painful adjustments. The cut in civil servants' salaries, the elimination of the baby check or the reduction of pharmaceutical costs are but the belated first steps in the right direction. Because the problems of our Economics are not limited to the recent uncontrolled deficit and the sharp increase in public debt, in an unfavorable economic context. On the contrary, we are suffering from the effects of serious structural deficiencies that reduce our capacity to recover from the crisis and, more worryingly, our potential for sustained growth and the creation of employment in the future.

In the coming months, new measures along the lines outlined above will be necessary. Moreover, we also need structural reforms to make our weakened economy more competitive Economics. We must ask the government for courage in tackling issues of great social and economic importance, such as labor reform. From the civil service examination, the employers' association and the trade unions we must demand a willingness to partnership to join forces and share costs. Drawing red lines or launching into a fierce criticism of the measures would simply mean a new denial of the inevitable, with the consequent costs.

Some will see in all this an unjustified yielding to the pressure of the markets, speculators or other governments, including that of President Obama. Nothing could be further from the truth. Undoubtedly, the adoption of decisive measures will appease the markets -and thus facilitate access to the financing we are so in need of-. But it will not be due to the whim or arbitrariness of the agents operating in them. It will be a powerful signal that we are willing to implement the policies that will lead us to a better future, even if we are aware of the sacrifices that this will entail in the short term deadline.