Bank of Spain Governor Miguel Angel Fernandez Ordonez urged the country to face up to its problems, saying it’s a “waste of time” to blame markets for a surge in borrowing costs.
Spain has to “recognize we have problems,” including “massive unemployment” and the “suspicious attitude of the markets that we have to use to finance ourselves,” Ordonez, who is also a member of the European Central Bank Governing Council, told a conference in Madrid today.
Spain has the highest unemployment rate in Europe, at 21 percent, and the figure rises to 45 percent among young people. The Socialist government, which suffered its worst defeat in three decades in local elections yesterday, has pledged to cut the euro area’s third-largest budget deficit and is negotiating with unions a second overhaul of labor laws in an attempt to win back investors’ confidence.
The gap between Spanish and German 10-year borrowing costs widened to 257 basis points today, the most in four months, compared with 243 basis points on May 20.
“Blaming the wickedness or avarice of markets would be a waste of time that could distract us from the fact that this cost can only be reduced if we adopt the necessary internal reforms and measures as soon as possible,” Ordonez said.
Ordonez said employers in Spain are reluctant to hire because of the legal and institutional framework, which the government should change.
Prime Minister Jose Luis Rodriguez Zapatero reduced firing costs for employers last year and made it easier for companies in economic difficulty to dismiss workers. Unions and employers are now in long-delayed talks over proposed changes to wage- bargaining rules. Employers want the overhaul to sever the link between wage increases and inflation.
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