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Spain has 'done its homework,' Merkel says

Published: 03 Feb 2011 18:01 GMT+01:00

"Spain has really done its homework and for that reason I think Spain is on a very good path," she said when asked during a joint news conference with Spanish Prime Minister Jose Luis Rodriguez Zapatero if she could "absolutely" rule out the need of a rescue package for Spain.

"The path that Spain is on is very positive, it's very good that they have carried out their reforms with the backing of unions and businesses ... and I think there's no room for any sort of speculation."

Her visit comes a day after Zapatero's Socialist government signed a "grand social pact" with unions and business groups on reforms to revive the economy that will gradually increase the retirement age from 65 to 67 just as Germany has done.

It also establishes the "basic principles" of a reform to Spain's collective bargaining system, which ensures joint wage rises across sectors and industries.

The deal is critical to Madrid's campaign to convince the markets that it can push through difficult labour reforms so as to speed up the economy, cut spending, finance the debt and avoid the need for a bailout such as those granted Ireland and Greece last year.

The government has also changed the labour law to make it easier to fire workers, a move it says will create jobs in a country with an unemployment rate of just over 20 percent, the highest level in the industrialised world.

Last week Madrid announced that all lenders must raise their levels of rock-solid core capital or face state intervention, its latest move to strengthen a financial system that is laden with bad debts from its exposure to a real estate collapse.

"The reforms carried out by Spain deserve all our respect," Merkel said.

AFP/ka

The Local (news@thelocal.de)

Your comments about this article

19:05 February 3, 2011 by Landmine
Guy looks a bit like Mr Bean lol....
01:21 February 4, 2011 by fryintl
Let's look at reality. Andalusia has about 30+ percent, as does teh area around Avila. Zaragoza is around 17%. Why does anyone care? The industry in Spain is pretty central. Barcelona and Madrid, sevilla to a lesser extent and Pais Basco are set for recovery and will. The rest of Spain is poor, have very little chance to recover and will suffer long after the world disappears in 2012 (LOL). The beach areas will do fine as all of Europe's richest have bought the property around the beaches, so they will see artificial numbers, based on teh income of the owners of the property.

Spain needs a political change, and the socialists must be taken from power. Teh days of Manual Braga, and his butt wipe Filipe Gonzalez are not yet over. Jose Maria Aznar is still needed and the COnservatives need to get into position when the German model fails due to a lack of industrial base.

We are going to see Spain float, Ital and Portugal will to, they are not going to have any m,arked improvement for soem time and if they are lucky, adn I love spain, they may survive this poor market. Protectionist tarrifs are the only way to save the Spanish, Italians and Portuguese. With teh European market being combined, that option is not available, so Germany will have to support the growth or sustainment (france to a lesser degree) of the entire union. The UK has the old money and banks, so they will have to be the lenders and will get very rich without doing much to improve the industrial base of the UK.

EUROPE: Your success is dependent upon two to three economies and if you are lucky, the smart people will be making the decisions.
08:52 February 4, 2011 by marimay
You thought the bubble in 2008 was big...

Just wait.
12:55 February 4, 2011 by freechoice
if Spain has done her homework, she wouldn't be in trouble right?
15:00 February 4, 2011 by Nemesis
Spain has done its homework.

Strange its economy crashed if I can remember correctly.
16:47 February 4, 2011 by catjones
Muchas gracias for the carping condescension Señora Merkel.
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