Spain Blames Economic Crisis on ‘Anglo-Saxon’ Conspiracy
Spain’s Socialist government seeks a foreign scapegoat for self-inflicted economic wounds.
February 20, 2010 - 3:35 am
Socialist Prime Minister José Luis Rodríguez Zapatero has ordered Spain’s official intelligence agency, the National Intelligence Center (CNI), to investigate whether the “Anglo-Saxon media” (aka English-language press) is conspiring to undermine the Spanish economy.
According to the center-left newspaper El País, which is close to the Zapatero government, the CNI is investigating “whether attacks by investors and the aggressiveness of some Anglo-Saxon media are being driven by market forces and challenges facing the Spanish economy, or whether there is something more behind this campaign.”
In recent weeks, the UK-based Financial Times newspaper and the Economist magazine, as well as some publications in the United States, have all published stories that have been highly critical of the economic policies being pursued by the Zapatero government.
To be sure, Spain is in the throes of the worst economic crisis in its recent history. Reeling from the collapse of a debt-driven construction boom, Spain has posted seven consecutive quarters of negative growth. According to the latest figures released by Spain’s National Statistics Agency, Spanish GDP fell 3.6 percent in 2009. The International Monetary Fund (IMF) says there will be no positive GDP growth in Spain until 2011, at which point it will still be below 1 percent.
At the same time, Spain now has the highest unemployment rate in the European Union. Nearly 20 percent of working-age Spaniards (or 4.5 million people) were without a job at the beginning of 2010. That compares with an average rate of 10 percent among the 16 countries that use the euro currency.
Spain is also facing an exploding budget deficit. The collapse of the labor market, which has resulted in a steep drop in tax collections, and the Zapatero government’s haphazard (and spendthrift) policy response of increasing unproductive public sector spending skyrocketed the deficit to nearly 12 percent of GDP in 2009 (or five times higher than in 2008).
The combination of negative GDP growth, rising unemployment, and a high deficit has raised concerns about the sustainability of Spain’s finances. Indeed, Standard & Poor’s, the credit rating agency, recently lowered its outlook on Spain’s sovereign debt from “stable” to “negative.” S&P, which had already lowered Spain’s maximum AAA rating in January 2009, cited the risk of a “prolonged period of below-par” economic growth and “persistently high fiscal deficits.”
Spain now faces the prospect of a downgrade of its government debt, which would make it more expensive for Spain to finance its debt. Indeed, investors anxious that a debt crisis in Greece could create a domino effect in Spain are already demanding higher interest rates to hold Spanish debt. As a result, the Zapatero government is working overtime to try to reassure debt markets that it will quickly return to fiscal prudence.