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Isabel Rodríguez Tejedo, Professor of Economics, University of Navarra, Spain

What cannot be cannot be

Mon, 30 Apr 2012 13:25:16 +0000 Published in La Razón

The risk premium is rising, inflation is rising, and let's not talk about the unemployment rate. Other things are going down, of course. Among others, the value of household savings, real wages, Standard & Poor's grade and growth forecasts for our country are falling. And in the midst of so many ups and downs, the one who is not moving is Merkel, who continues to say that the discipline tax is non-negotiable.

It is no longer news that the 6% deficit we promised has ended up becoming 8.51%. The regional administrations are the ones who bear most of the blame (of that 2.51% "excess", almost two thirds have come from the excess of regional deficit). For the record, neither the State, nor the Social Security, nor the local authorities are in compliance. Some more and others less, all have failed to comply with the goal deficit. But the autonomous communities are in the lead, and this has been the case for two years now. There is no doubt that the crisis has deeply affected them, and that Health and Education (items that they manage) are especially socially sensitive expenses. We can also point out that their financing system favored fiscally irresponsible behavior, and that not all the communities have behaved in the same way, nor did they have the same starting point.

Brussels reiterates that, given their weight in public finances, bad behavior in the autonomous communities is dangerous and urges that the stability law, which comes into force in a few days, be applied seriously. It is time to paint numbers in red, say goodbye to the structural deficit except on exceptional occasions (note that the recession we are suffering is one of those) and bang our heads on the ceilings of expense. One feature B is that the penalties that may result for our country from non-compliance with subject of stability will have to be paid by the administration manager, which will also have to submit to extraordinary controls. In short, more discipline.

In some communities, the historical data of fees of indebtedness with respect to their GDP reveals a disproportionate use of credit . This is something for which, among other things, we will have to pay. There is no doubt that adjustments have already been made, but more will have to be made. The autonomous expense is going to have to restrain itself. It is not the best moment, and it will undoubtedly be painful. But it seems necessary and, perhaps more bitterly, inevitable.