IMF / SPAIN ECONOMIC FORECAST

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At the launch of the IMF’s regular health check for the Spanish economy, mission chief James Daniel said Spain needed to maintain its recent progress on reforms to create jobs. (IMF)
Description

STORY: IMF / SPAIN
TRT: 2.38
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: RECENT, WASHINGTON, DC

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Shotlist

RECENT, MADRID, SPAIN

1. Wide shot, Skyline

RECENT, WASHINGTON, DC

2. SOUNDBITE (English) James Daniel, Mission Chief to Spain, IMF:
“Well, already we see signs that the recession is ending and very likely growth should return later on this year, but the recovery will be weak and we’ll probably see low numbers for the next couple of years. However, growth could be stronger especially if the government were to continue with its reforms and if there be more support from the rest of Europe.”

RECENT, MADRID, SPAIN

3. Wide shot, university
4. Med shot, students working

RECENT, WASHINGTON, DC

5. SOUNDBITE (English) James Daniel, Mission Chief to Spain, IMF:
“Unemployment amongst young people in Spain is very high and it’s a tragedy for many reasons; on a personal basis, on a social basis, but also from an economic basis it’s terribly costly. It’s something that we are very concerned about. And even when young people do get a job it tends to be a temporary job, not a permanent job. So what can be done? Well, it’s a complex issue but a number of things could be done. First of all, they could be better trained and given more help to find work. Secondly, all those taxes and regulations that make it very burdensome to hire young people can be reduced. And thirdly, a better balance can be struck between those with well-protected permanent jobs and those with less well-protected temporary jobs. A fairer balance could perhaps be struck.”

RECENT, MADRID, SPAIN

6. Med shot, truck delivering food
7. Wide shot, Food market

RECENT, WASHINGTON, DC

8. SOUNDBITE (English) James Daniel, Mission Chief to Spain, IMF:
“Entrepreneurs are the future of employment and growth in Spain. Anything we can do the help entrepreneurship and enterprises should be done. And one of the things we’re hearing when we speak to entrepreneurs, when we speak to businesses, and, indeed, when we speak to banks is that the cost of credit for these small and medium enterprises is very high, and in particular it’s much higher than similar firms in say, Germany, or say, France. So, one of the things that could be done both by Spain but especially by the euro area is to have a more level playing field between firms in Spain and firms elsewhere in the euro area.”

RECENT, MADRID, SPAIN

9. Wide shot, pedestrian street

RECENT, WASHINGTON, DC

10. SOUNDBITE (English) James Daniel, Mission Chief to Spain, IMF:
“Well, tax rates in Spain are quite high but tax collection is quite low. And this is because there are lots of special treatments, exemptions. And this is not only bad economics, it’s also unfair for those people that actually have to pay these high rates. So what we want is more tax collection, not necessarily higher tax rates.”

RECENT, MADRID, SPAIN

11. Close-up, Spanish flag

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Storyline

The International Monetary Fund says that Spain is making important progress on reform in its annual check-up of Spain’s economy, but the outlook remains difficult.

The IMF’s top economist on Spain, James Daniel, pointed to labor reform measures instituted last year, a major bank clean-up, and a number of fiscal policies as positive steps. He said further action is needed to generate growth and jobs, both by Spain and Europe.

‘Well, already we see signs that the recession is ending and very likely growth should return later on this year, but the recovery will be weak and we’ll probably see low numbers for the next couple of years. However, growth could be stronger especially if the government were to continue with its reforms and if there be more support from the rest of Europe,” said James Daniel, the IMF’s mission chief to Spain.

Daniel said one of the biggest challenges for Spain is its high unemployment which was over 27 percent in the first quarter of this year.

One aggravating factor for youth unemployment is the divide between temporary and permanent contracts. Daniel said the probability of finding a permanent job remains too low and that of losing a temporary job too high.

‘Unemployment amongst young people in Spain is very high and it’s a tragedy for many reasons; on a personal basis, on a social basis, but also from an economic basis it’s terribly costly. It’s something that we are very concerned about. And even when young people do get a job it tends to be a temporary job, not a permanent job. So what can be done? Well, it’s a complex issue but a number of things could be done. First of all, they could be better trained and given more help to find work. Secondly, all those taxes and regulations that make it very burdensome to hire young people can be reduced. And thirdly, a better balance can be struck between those with well-protected permanent jobs and those with less well-protected temporary jobs. A fairer balance could perhaps be struck.’ Daniel said.

The IMF is calling on the ECB to do more to reduce the higher borrowing costs facing Spain’s private sector.

The IMF says that Europe is in a position to do more by speeding up progress on a full banking union by allowing Spanish firms to compete for funding on their own merits rather than on their country of residence.

These moves would help Spanish businesses.

‘Entrepreneurs are the future of employment and growth in Spain. Anything we can do the help entrepreneurship and enterprises should be done. And one of the things we’re hearing when we speak to entrepreneurs, when we speak to businesses, and, indeed, when we speak to banks is that the cost of credit for these small and medium enterprises is very high, and in particular it’s much higher than similar firms in say, Germany, or say, France. So, one of the things that could be done both by Spain but especially by the euro area is to have a more level playing field between firms in Spain and firms elsewhere in the euro area,’ Daniel said.

Daniel said that tax rates in Spain are high and it would be better to collect existing taxes rather than raise tax rates.

‘Well, tax rates in Spain are quite high but tax collection is quite low. And this is because there are lots of special treatments, exemptions. And this is not only bad economics, it’s also unfair for those people that actually have to pay these high rates. So what we want is more tax collection, not necessarily higher tax rates,’ Daniel said.

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IMF
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U130802a