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Spanish report Spanish report
by Euro Reporter
2011-12-12 07:42:15
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Spain's example shows limits of EU targets

As euro-zone leaders discuss whether to impose penalties on heavily indebted member countries that break certain fiscal limits, Spain's experience shows why more centralized supervision of governments' budgets is unlikely to address some key economic problems plaguing the currency bloc and undermining investor confidence. Analysts say plans to prod member countries to cut their public debt and keep their deficits in line ignore the recent history of nations like Spain—which met those limits before 2008, but had serious economic vulnerabilities brewing underneath, mainly a property bubble.

The new plan, advocated by French President Nicolas Sarkozy and German Chancellor Angela Merkel, "is a one-size-policy-response-fits-all type of approach which I think doesn't address some of the problems that some countries are facing," including low internal demand, weak international competitiveness and nearly frozen bank lending, says Jacques Cailloux, chief European economist at Royal Bank of Scotland. Spain, the euro zone's fourth-largest economy, is a key example. Leading up to the 2008 financial crisis, it was one of few euro-zone countries—Ireland was another one—that complied with the EU's so-called Stability and Growth Pact. Since 1998, Spain's budget deficits came in below the limit of 3% of gross domestic product.

The country ran surpluses some years. Government debt stayed below 60% of GDP, and climbed above that threshold only last year. It remains well below the euro zone's average. These achievements were helped by the Spanish government's wish to project fiscal responsibility as well as the boom in its property sector. But Mr. Cailloux says meeting those targets didn't prepare Spain for or fix the problems that had built up in its economy during the housing boom and that became clear after that bubble burst in 2008.


Spain weighing a fast, costly cleanup of banks

Spain's incoming prime minister, intent on curing the country's ailing banking sector, is considering cleanup plans that could dwarf the cost of previous efforts, including the creation of a state-funded "bad bank" to acquire toxic assets or a move to force banks to dramatically boost loan-loss reserves, people close to the situation say. Prime Minister-elect Mariano Rajoy has said he wants to speed up the process of dealing with €176 billion ($236 billion) of impaired real-estate assets from Spain's housing bust, although he played down the potential cost of his plans ahead of last month's elections.

The bad assets are choking off the flow of credit and making international investors wary of the euro zone's fourth-largest economy. Bank cleanup is a key element of a program of economic reforms that Mr. Rajoy will present to French President Nicolas Sarkozy, German Chancellor Angela Merkel and U.S. Treasury Secretary Timothy Geithner on the sidelines of a meeting of the European People's Party, a gathering of leaders of center-right parties from around Europe, in Marseilles on Wednesday and Thursday. European leaders are looking for clear commitments to reform from ailing countries like Spain and Italy ahead of a summit on Friday where they are expected to agree on new mechanisms of governance and financial support to underpin the euro.

"It makes sense to give restructuring a push by cleaning up balance sheets; it signals things are moving along," said Tano Santos, a finance professor at Columbia University in New York. "That has been one of the most damaging things in the Spanish crisis: the lack of movement." A more aggressive response won't come cheap. Analysts estimate a quick fix, such as setting up the bad bank or forcing banks to dramatically boost loan-loss reserves and providing government capital to backstop them, could cost the Spanish state as much as €100 billion. That sum raises concerns that the effort could break the government's finances, as happened to the Irish government when it recapitalized its banks and blew out its deficit to 32% of gross domestic product in 2010.


Study finds Spanish gender gap in Internet use and frequency

A new study reveals how the digital gender gap in Spain is larger than the European average. Presented in the journal Reis, the study investigated the use and frequency of the Internet in Spain and 30 other European countries. The findings indicate that Spanish men use the Internet more frequently than Spanish women do. Compared with the average of all 31 nations, Spanish men rank 17th and Spanish women rank 19th. This puts Spain under the average in Europe for information and communication technologies (ICT) use. With respect to the level of gender equality in the digital world, Spain fares even worse by ranking 20th.  'Spanish men and women score lower than the European average on ICT use,' explains Juan Martín Fernandez from the Complutense University of Madrid in Spain and one of the authors of the study. 'For women, internet use frequency is lower than that of men and the gender gap is wider than the European average.'

The countries that report the highest levels of ICT use along with the smallest gender gap are Denmark, Finland, Iceland, Norway and Sweden, followed by France and Slovenia, with the Netherlands just behind. With respect to Germany, Luxembourg and the United Kingdom, users in these countries score low in gender equality despite reporting high ICT activity.  Hungary, Malta, Portugal and Slovakia rank somewhere in the middle of the road, with Bulgaria, the Czech Republic and Romania just behind. Belgium and Poland post high levels of gender equality in Internet use but not when it comes to society at large. Joining Spain in lower Internet use and gender equality are Croatia, Cyprus, Greece, Ireland, Italy and the Former Yugoslav Republic of Macedonia. Women in Spain rank just above the average in Internet use when it is linked with specific areas, namely: public administration, leisure, employment, health and education.

'Women in Spain come in lower than average of internet use and frequency on far more occasions,' says Dr Fernandez, 'so much so that this far outweighs the few occasions in which they come in higher than the European average.'  He goes on to say that equality, frequency and integration of ICT uses come hand in hand. 'Sometimes it is thought that with the extension of infrastructures and the passing of time, the gap will be bridged. Our results show that this is not the case. Active and encouraging policy is required in order to overcome this inequality,' Dr Fernandez concludes.  Earlier this year, Internet World Stats reported that the EU had more than 338 million Internet users, with a penetration population of 67.3%. This figure is much higher than the rest of the world, which had a penetration population of 27.3%.

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