Sarkozy and Barclays: what a happy coincidence over Spain

At The Corner, we have a noticeable penchant for mixing news from the bright side, so we couldn’t let pass this occasion in which one of the core-Europe main actors and some British-based bank analysts have had warm opinions on the state of the Spanish economy (emphasis is ours.)

According to this piece of reporting from the best-seller Spanish newspaper El País, at the end of the European Council meeting, French president Nicolas Sarkozy last weekend sent a positive note concerning Spain’s plan to reign in the national deficit and cut back its reliance on the capital markets.

Sarkozy said that Spain

“is no longer at the forefront” of the debt crisis. That is, the Spanish economy has come out of the zone where it was at risk of being swept away by the contagion effect of the Greek bankruptcy.

“Sarkozy, whose party belongs to the same ideological family as the Spanish PP, took great care not to interfere in the Spanish electoral campaign and gave credit to both the ‘enormous efforts’ of the Spanish president José Luis Rodríguez Zapatero, as well as to the ‘responsibility’ of the opposition leader Mariano Rajoy.

Zapatero threw a few reflections of his own with the French president’s words.

“We have made many efforts … there are still many things that need to be done … the Spanish economy has major challenges to face, such as growth and employment, but financial stability is solid now,” he said.

El País adds that the French president’s remarks had in them something of a rebuke to German Chancellor Angela Merkel, as he was somehow responding to criticisms made on Saturday by Merkel:

“in a ceremony with the youth branch of her party, [Merkel] called for further adjustments from the Spanish Government. ‘Spain has done a great deal, but it will probably have to do a great deal more to restore market confidence,’ she said at the time. Sources of the Moncloa replied to the German Chancellor reminding her that Spain has already taken “additional measures” to ensure compliance with the deficit target, set this year at 6%. ‘The extra effort that Merkel demands has already been made,’ said the same sources.

But, where is that extra to be found?

“Since July, the Government has taken several steps to save a total of 7,654 million euros. This amount comes from revenues from auctions of radio broadcasting space (2,000 million), the reduction in interest payments on the debt forecast (€2,000mn), the prescription of generic drugs (€400mn), the advance of corporate taxes (€2,600mn) and reductions of expenses of various ministries (€650mn).”

All of which, bit by bit, seems helpful …and sort of urgent, due to the insubordinate autonomic finances:

“This, according to the same sources, allows the government to provide a cushion to offset the anticipated deflection of the regions’ deficit that at the end of the first semester was at around 1.3% of the GDP, a rate that had been calculated for the entire year.”

At Barclays, forecasts for next year point at an improvement in the Spanish general economic situation, too, what must be understood as a confirmation that the extra miles Spain is committed to run will pay off soon.

“After many years, a significant trend towards convergence in the growth of major countries can be seen. Spain will grow by 0.8% in 2012, the Netherlands 1%, France 1.2% and Germany 1.2%.

“Spain is entering at the back of the ‘core’ group or preppies, moving away from the peripherals such as Italy, that will grow only 0.5%; Portugal 1.7%, and Greece 2.5%. This highlights the efforts of the Spanish authorities, although they could have done more, when compared with other countries around us, but we did not do things that badly after all. We are aware that the growth estimates will be lowered, but we think the end result will not be in contradiction with the conclusion that we have just announced, and that is, more convergence in growth which will facilitate the work of the ECB “.