Christine Lagarde, the head of the International Monetary Fund, has poured cold water on claims from the Spanish government that the recession is over and the country is on the road to recovery.
Speaking at the Global Forum on Spain in Bilbao she said: "Thanks to the formidable actions over the past five years, Europe – and Spain –are now turning the corner.
Yet the task is far from finished. Growth remains too low and unemployment too high for us to declare victory on the crisis."The scars of the crisis run deep and will take years to heal, Lagarde said.
"There is no doubt that the reforms that I have outlined for Europe and for Spain will take several years of determined efforts by both government and society."
The good news, she said, is that Spanish exports have risen faster than Germany's. Insisting that the "strong reform momentum must be maintained", she called for a continued shakeup of the labour market, and said reforms "should not benefit those in work but those without it".
But she was immediately attacked for, in effect, advocating more wage cuts. Joaquín Almunia, the European competition commissioner, who was also in Bilbao, criticised Lagarde for calling for wage cuts, which he said would be "neither sensitive, reasonable nor fair".
"Sacrifice has to be shared, and economists should not demand what is not viable in practice," he said. She pointed to three key areas that need reform. The first is the labour market, but she said the reforms "shouldn't benefit those in work but those without it."
The Spanish government has already made it much easier for firms to sack employees, and has pushed down wages. Last week the Bank of Spain insisted that since the crisis began wages have fallen twice as fast as the government claims they have.
If the lowest paid who had lost their jobs were taken out of the equation, the wages of those still in work could be seen to have declined sharply, the bank said.
Lagarde also singled out the high level of debt, calling on the government to reduce its deficit by raising VAT and income tax. Her third target was reform of the business environment, in which companies, especially new ones, are hamstrung by a labyrinthine bureaucracy.
"Making it easier for businesses to start up and grow will lift their capacity to create employment," she said. "Making domestic firms more competitive will also boost their employment and productivity."
Luis De Guindos, the Spanish finance minister, insisted that "unlike 2011, this is not a false recovery". However, he said it remained "tenuous and soft".
Meanwhile, groups of hooded demonstrators protesting at the summit chanted "Troika, go home!" and rioted in central Bilbao, smashing the windows of banks and setting fire to rubbish containers.
theguardian.com
Speaking at the Global Forum on Spain in Bilbao she said: "Thanks to the formidable actions over the past five years, Europe – and Spain –are now turning the corner.
Yet the task is far from finished. Growth remains too low and unemployment too high for us to declare victory on the crisis."The scars of the crisis run deep and will take years to heal, Lagarde said.
"There is no doubt that the reforms that I have outlined for Europe and for Spain will take several years of determined efforts by both government and society."
The good news, she said, is that Spanish exports have risen faster than Germany's. Insisting that the "strong reform momentum must be maintained", she called for a continued shakeup of the labour market, and said reforms "should not benefit those in work but those without it".
But she was immediately attacked for, in effect, advocating more wage cuts. Joaquín Almunia, the European competition commissioner, who was also in Bilbao, criticised Lagarde for calling for wage cuts, which he said would be "neither sensitive, reasonable nor fair".
"Sacrifice has to be shared, and economists should not demand what is not viable in practice," he said. She pointed to three key areas that need reform. The first is the labour market, but she said the reforms "shouldn't benefit those in work but those without it."
The Spanish government has already made it much easier for firms to sack employees, and has pushed down wages. Last week the Bank of Spain insisted that since the crisis began wages have fallen twice as fast as the government claims they have.
If the lowest paid who had lost their jobs were taken out of the equation, the wages of those still in work could be seen to have declined sharply, the bank said.
Lagarde also singled out the high level of debt, calling on the government to reduce its deficit by raising VAT and income tax. Her third target was reform of the business environment, in which companies, especially new ones, are hamstrung by a labyrinthine bureaucracy.
"Making it easier for businesses to start up and grow will lift their capacity to create employment," she said. "Making domestic firms more competitive will also boost their employment and productivity."
Luis De Guindos, the Spanish finance minister, insisted that "unlike 2011, this is not a false recovery". However, he said it remained "tenuous and soft".
Meanwhile, groups of hooded demonstrators protesting at the summit chanted "Troika, go home!" and rioted in central Bilbao, smashing the windows of banks and setting fire to rubbish containers.
theguardian.com
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