Spanish Socialists move swiftly to implement economic measures
Spaniards have always applauded brave matadors, and Prime Minister Felipe Gonzalez Marques is gaining admiration for taking the economy by the horns. Spain's new Socialist government wasted no time in announcing bold, unpopular economic measures almost immediately after taking office.Skip to next paragraph
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First came a surprise 8 percent devaluation of the peseta only 24 hours after the new government was sworn in, accompanied by restrictive monetary measures that immobilized an additional 1 percent of bank deposits. Then, three days later, the first cabinet meeting approved a 20.5 percent average price increase on gasoline and fuels. Further price hikes in electricity tariffs, transportation costs, and probably pharmaceuticals are expected.
(This week the new Socialist government carried out a campaign promise by ordering a reduction in the workweek to 40 hours and set annual holidays at 30 days. The two-hour cut in hours and boost in holidays from a usual 26 or 28 days will bring Spain into line with European Community standards, Labor Minister Joaquin Alumnia said. The National Employers Association estimated the cost to the economy to be around $1.4 billion.)
Though critical of some parts of the economic adjustment package, businessmen , bankers, and the Spanish press cried, ''Ole.'' The devaluation even got a few 'bravos' from economists and bankers who termed it ''urgently necessary.'' Jose Teijeiro, an economic adviser of the Private Banking Association, even praised the new government ''for its courage.''
Consumer organizations and labor unions limited criticism to ''the manner of raising prices'' which, they said, could have been more gradual or staggered. Bankers were most disturbed by the government's decision to tighten credit, but accepted with resignation Mr. Gonzalez's call for ''solidarity in the economic crisis.''
The new Spanish prime minister explained that the fuel price increase would only add 1.5 to 2 percent to the year's inflation rate which was expected to run about 14.5 percent. He declared that the price hikes were long overdue ever since last July when the peseta began to slide downward. Most analysts comment the Socialists evidently decided to get the worst of the inevitable measures over with as soon as possible so they could be attributed to the former government.
Of all the measures, devaluation was most easily accepted. Rafael Termes, president of the Private Banking Association, termed it ''convenient for Spain but useless without complementary measures.''
Former Economics Minister Jose Luis Leal, who now is an adviser for a private bank, considered the devaluation ''necessary because our prices have grown faster in the last two years than those of the Common Market, and our exchange rate was artificially maintained.''
The Bank of Spain lost an estimated $3 billion in reserves this year to sustain the peseta. Part of this has already begun to return. On the first working day after the devaluation, Spain's central bank obtained $500 million in reserves and the peseta gained slightly, only to lose ground later because of the dollar's strength against all European currencies.
According to Miguel Boyer, the new ''super minister'' of the economy, treasury, and commerce, the devaluation was necessary to prevent further speculation against the peseta and to improve Spain's trade balance.
Although Mr. Gonzalez optimistically predicted healthy results for the Spanish economy without imposing a true stabilization plan, Mr. Boyer has been meeting all last week with bankers and businessmen to discuss the consequences of the package and to plead for solidarity.
The National Confederation of Employers, the Socialists' most belligerent critics, have insisted on a need for complementary stabilization measures such as wage and price controls. Otherwise, they said, it would be impossible to obtain the Socialist goal of a 12 percent inflation for 1983. Mr. Gonzalez has opted for negotiated voluntary controls.
Bankers have objected to the credit-tightening measures involving their deposits, fearing these might be a first step toward the socialization of the banking sector. Mr. Boyer insisted the measure ''has nothing to do with socialization of the bank, but could be interpreted as a warning that we are willing to undertake an adjusted monetary policy. It's logical that bankers are not enthusiastic because it means sacrifice, but it's the same sacrifice that we all have to endure.''
Alfonso Escamez, the president of Spain's largest bank, Banco Central, said conversations with the Socialist minister were ''cordial.'' He added the banks have no solution other than to accept the obligation imposed by the government.
Throughout last week, Mr. Gonzalez insisted that there would be no stabilization plan, that buying power would be maintained, and that ''Spaniards will not be any worse off next year'' after his adjustment package.
The Socialist economic program aims for an economic growth of 2 to 2.5 percent next year, well above this year's 1.3 percent, but below what most experts feel necessary to generate new employment. Unemployment in Spain, is running a staggering 16 percent, which the Socialists say will be lowered by only 0.5 percent next year.
''There is little room for innovation,'' Mr. Boyer stated repeatedly.