The European official praises the strong performance of the Spanish economy but warns of the threat
EU commissioner Pierre Moscovici: “We need a pro-European, proactive government in Spain”
With little more than 72 hours to go before Spain holds a snap general election, the EU Commissioner for Economic and Financial Affairs, Pierre Moscovici, gave an interview in which he piled praise on the Spanish economy and played down the the signs of instability and political fragmentation, with one exception: the emergence of a far-right force, Vox.
“That paves the way for dangerous alliances,” laments the socialist politician, who has been on the frontline of European politics for a quarter of a century. “Far-right parties are a danger to European democracy.” Still, Moscovici feels that Spain has a large enough central bloc to prevent an Italian-style drift towards populist politics.
Question. Spain is still without a budget. Are you worried about that?
Answer. This is not the first time that a parliament has failed to vote a budget through. Now comes the good news. Confirmation that Spain reduced its deficit to 2.5 por ciento of GDP in 2018 opens the way to take it out of the Excessive Deficit Procedure [EU action that could culminate in sanctions] that it entered 10 years ago. The robust growth in Spain has been a decisive factor in this reduction. If the forecast that I will present in May suggests a deficit of under 3 por ciento in 2019 and 2020, we will propose ending the procedure. And of course we hope that after the election, there will finally be stability with a sufficient majority to get the budget passed.
Q. Are you concerned about the Socialist Party (PSOE) and Podemos’ pledges to increase social spending?
A. We don’t comment on campaign promises. Up until now we have seen credible fiscal policies from both the Popular Party (PP) and the PSOE, which have taken Spain towards the end of the deficit procedure. This began with the previous administration of Mariano Rajoy and it continues to be so with Pedro Sánchez. When I look at Mediterranean countries I see that Portugal and Greece, with leftist governments, sometimes even with far-left allies, have not performed worse fiscally than others.
Q. There is a fourth country in the south: Italy. Spain has held three elections in four years. Do you fear an “italianization” of Spanish politics?
A. Not at all. These days, Italy is headed by two populist parties that created a situation that was initially dangerous for the balance of its own finances. This was corrected after tough negotiations with the European Commission. Spain’s case is very different. It is true that a far-right party has emerged, and that is a cause for concern. And Spain has been hit by the kind of fragmentation that characterizes the entire European political spectrum. This opens the door to unconventional alliances that can occasionally be dangerous. A far-right party is dangerous for European democracy, especially because it attacks the European project. But there are safeguards in Spain, with parties like the PSOE, PP or Ciudadanos (Citizens), which have different but credible programs. It is up to citizens to decide which one is better for Spain’s credibility, democracy, progress and social justice.
Q. Are you concerned that some reforms could be rolled back, such as the pension reform?
A. I will comment on the policies carried out by any government that emerges from the ballot boxes, whether on one side of the political spectrum or the other, but I will not comment on campaign platforms.
Q. The opposition has criticized the Sánchez administration for raising the minimum wage. Has this measure hurt the labor market?
A. The Spanish economy is performing well. The scars of the crisis are still there in the form of high unemployment. But the recovery has been among the most consistent in the euro zone and joblessness has dropped under 14%, a 12-point reduction, even though it is still above the European average and unacceptably high. One of the challenges is to create stable, quality, long-term jobs because many young people are trapped in temporary contracts. When a country has made great sacrifices, there comes a time when people demand a reward. The time comes to raise wages. It is not illegitimate to raise the minimum wage if it is done in such a way that it does not harm the economy.
Q. Is increased inequality, caused by the austerity measures, the price to pay to exit the Excessive Deficit Procedure?
A. We all made mistakes as we battled the crisis. And we are paying socially through greater inequality, and politically through the rise of nationalist and populist parties. I hope that the new government will understand that one of its priorities must be to deal with inequality. The economic crisis has ended, but the social and political crises are still there, not just in Spain but all over Europe.
Q. What do you propose?
A. A euro zone budget for convergence with a stabilizing function. That is why we need a pro-European, proactive government in Spain. And that’s why I welcome the fact that Pedro Sánchez and his executive have backed the most ambitious proposals in the design of this euro zone budget. And to be frank, I have to say that I had a good relationship with the previous administration as well.
Q. You have linked the rise of populism with the euro crisis, but some people feel it has nothing to do with it, because populism has also emerged in the US, Brazil and the Philippines.
A. The crisis was global, but it was deeper in Europe because our economy suffered more, and we required more reforms to be competitive. At the same time, we had to keep our public finances and debt levels in check. Individuals can feel attached to their country, but Europe must remain united with a common goal that is now under threat and must be defended. Europe is not just Brussels or the Eurogroup, it is what we build together. And the greatest responsibility for this still lies with the member states, let’s not forget it.
Q. The economy continues to slow down. Do you fear a recession?
A. We don’t fear a recession, but we are following the evolution of the economy, which is growing at a slower pace than in the last year. There is some uncertainty over trade policies and a weaker foreign sector, but there are also internal challenges such as Brexit or the Italian situation. We still have some bright spots: we are creating more jobs with less growth. We are expecting a recovery in the second half of 2019 and 2020, though not to the levels of 2017 and 2018.
Q. At the end of the last Eurogroup meeting, you said that we had to be mentally prepared for any type of response that might be necessary. What were you alluding to?
A. We have to be aware of the danger of a steeper downturn. We will need a more ambitious Europe and a coordinated approach. There are some highly indebted countries that must continue making efforts to reduce their debt. But others, like Germany or the Netherlands, have large surpluses that they must use to invest more in their citizens and for the benefit of the entire euro zone.