The European Central Bank (ECB) published the correspondence of 2011 between the former president of the company, Jean-Claude Trichet and former head of the Spanish Government José Luis Rodríguez Zapatero. In a letter dated August 6, 2011 letter, Zapatero Trichet wrote to the Spanish government would undertake measures “in line with the proposals” made by the then President of the ECB in an earlier letter and asked that the entity intervene in the sovereign debt market to help Spain.
Trichet and the then governor of the Bank of Spain, Miguel Angel Fernandez Ordonez wrote from Frankfurt to Zapatero on August 5, 2011 a confidential message, reclassified for publication later: “The Governing Council considers that Spain urgently needs support its sovereign status of firm and its commitment to fiscal sustainability and structural reforms with credible evidence,” Trichet and Ordonez indicated in the letter. By this time Trichet and Ordonez saw the need for Spain approved measures to “improve the functioning of the labor market, in order to firmly progress in reducing the very high unemployment.” They insisted on the need for wage reform got into agreements at company level and ensure “effective decentralization of wage negotiations.” Showed concern that the Spanish government had not taken steps to abolish adjustment clauses inflation wage increases.
Trichet and Fernandez Ordonez also encouraged the Spanish Government to undertake reforms in the product market . Specifically, urging increase competition in the energy sector so that prices better reflect the cost of energy and to reduce the high dependence of the Spanish economy itself. Also intended to promote the rental market housing and increase competition in the services sector.
Zapatero responded in his letter that the Spanish government would announce new fiscal consolidation measures to reduce the budget deficit by 0.5% of Gross Domestic Product (GDP), with the aim of not exceeding 6% in late 2011. Specific initiatives included a reduction in drug spending 2,400 million euros, improvements in the management of corporation tax 2,500 million in 2011, additional revenue from auctioning of the spectrum in the amount of 2,000 million euros and structural measures for the labor market. Zapatero cited “the reform of collective bargaining” to increase business flexibility and the intention of the Spanish Government to adopt “regulatory changes in labor legislation, improving flexibility in hiring in order to increase job creation.”
He remembered the then Spanish Prime unions agreed not to link wage increases with inflation, but with productivity, following one of the objectives that Trichet had established. Also emphasized that the deficit reduction of the electrical system was “a priority, having increased electricity rates by more than 11% since the beginning of the year.”
Zapatero expressed a concern about Trichet impact of financial stress at that time for Spain, and the difficulty that the reforms were fully operational short term. “It is impossible that such reforms are fully operational in the near term to correct the dysfunctions that are occurring right now in the financial markets,” Zapatero warned in the letter. He added that “the Government of Spain considers that the European Central Bank can play a crucial role in reducing tensions through the purchase of Spanish public debt in sufficient volume to stabilize markets and ensure the correct operation of the transmission mechanism monetary policy “.
Such actions should maintain its impact to the possibility of intervening in the secondary market through the European Financial Stability Facility (EFSF, its acronym in English), considered. “I trust that the Governing Council of the European Central Bank contribute to the adoption of this measure to meet the exceptional circumstances that threaten the euro area”, apostillaba Zapatero (EFE).
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