A Surprisingly Strong Recovery
SPAIN is, as ever, in transition. Two old totems of pride, King Juan Carlos and the national soccer team, have crashed and burned. The now ex-king handed the throne to his son, Felipe VI, on June 19th, a day after Spain’s trophy-laden soccer stars were booted out of the World Cup. Fortunately the country has meatier reasons for cheer. With recession over and jobs being created, it is shaking off the long hangover caused by its bubble-fuelled party.
Even Mariano Rajoy, the centre-right prime minister, seems surprised by the pace of recovery. The government did not expect internal demand or credit to small companies and consumers to pick up so soon. Growth is already boosting employment, opening the way to a virtuous cycle of increased demand and more job creation. Growth predictions for next year are being revised upwards, some to over 2%. Investors have arrived in force, hoping it will soon be party time again. Life will get better for credit-starved small businesses, after the European Central Bank announced €400 billion ($544 billion) of cheap loans to euro-zone banks that lend more to businesses. The government is promising small tax cuts, but steering clear of ambitious fiscal reform as it tries to recover popularity before next year’s election. It has tightened this year’s budget deficit target from 5.8% of GDP to 5.5%.