Spain: IMF calls for reforms "urgent".

Tags: reforms, SPAIN, Zapatero.

The International Monetary Fund (IMF) recommends reforms to Spain "urgent" to improve the functioning of its labor market and its banking system, following a mission in the country.

Pending his detailed report to be published in the summer, the International Monetary Fund (IMF) arecommended Monday in Spain of reforms "urgent" to improve the functioning of its labor market and its banking system, following a mission in the country.
"Government policy should focus on a smooth rebalancing of the economy", said the institution in a statement, calling for "urgent and determined action." "The analysis that the IMF has made the situation corresponds to that of government, namely that the Spanish economy has entered a phase of stabilization (...) but that recovery is still fragile and that the government must not delay the planned structural reforms, "he responded, tit for tat, the Department of Economics.
The IMF has set three priorities. The first is to make the labor market more flexible, to promote employment and redistribution between sectors in a country where unemployment rate exceeded 20% in first quarter.
The Fund is particularly interested in the cost of dismissal to be lowered "at least average levels prevailing in the European Union, that indexing wages to inflation is abolished and the" decentralization of wage setting.
The second priority is fiscal consolidation for putting the public finances on a sustainable basis. The government has launched austerity measures to save 15 billion euros in 2010 and 2011.
"An ambitious fiscal consolidation is underway to achieve the deficit target of 3% of GDP by 2013, said the IMF has stated its support for measures adopted by the Council of Ministers on Thursday.
"Achieving these objectives will be critical and any slippage must be vigorously countered," said the Fund, which, in scenarios that could threaten the recovery of the Spanish economy, including higher interest rates for loans state but also for the private sector.
The third priority consolidation of banking sector reform and to strengthen the health and effectiveness of the system, For which "the risks remain high and unevenly distributed between institutions, focused primarily on savings.
These concerns have been shown Saturday by placing one of these savings, the Cajasur, Trust Bank of Spain.
"The economy of Spain needs deep reforms and complete. The challenges are immense, "said the IMF, among others under the" labor market failures ", a" high budget deficit "or a" Productivity growth sluggish "and" low "competitiveness.
He reiterated that it expected "a further adjustment of the various imbalances, with growth rising progressively to 1.5 to 2% over the medium term." In April, the IMF said it expected a decline of 0.4% of GDP in 2010, a growth of 0.9% in 2011.