The Rafael del Pino Foundation received, as part of its Master Lecture programme, Professor Juergen B. Donges, who gave a lecture on "Europe and Spain: how will confidence return? Donges, who gave the lecture "Europe and Spain: how will confidence return?
Juergen B. Donges argued that: "The [Spanish] government must present a detailed multi-annual fiscal consolidation plan as soon as possible, as this is the only way to inspire maximum confidence in its medium-term fiscal policy; it is not enough to promise that the public deficit will be reduced to 31.3% of GDP by 2013, without knowing the roadmap for the expenditure and tax items. Already now it can, and should, be said that VAT will have to be raised, and not just a little, given its high revenue-raising capacity, even if there is fraud and private consumption is weak. This has been done in all countries (including Germany). Austerity and growth are not incompatible objectives, but profoundly complementary. What should not be envisaged is a lengthening of budgetary consolidation timetables, as some recommend; for what at first sight may appear to be a method of facilitating execution, in reality sows doubt about the seriousness of Spain's commitment to pure and hard measures that will never be easy to fulfil [...] If budgetary consolidation is applied with determination and if it is accompanied by the necessary structural reforms in the real economy, as is happening in Spain, the contraction in economic activity will be temporary. Empirical evidence from other countries supports this. In the case of Spain, the financial markets will eventually take note that seriousness and a sense of responsibility in the political decision-making spheres have returned to this country and they will take a positive view of the improvement in the economy's fundamentals".
The 'Fiscal Compact' will only work if the Eurozone countries are prepared to give up a large part of their budgetary sovereignty to the EU bodies, in the opinion of Professor Donges: "This affects, of course, the reigning prerogative of national parliaments, which is to shape state budgets and decide how spending is financed. There will be more than one notable opposition - in every country. Already an alliance of European leaders is forming against the misnamed 'Merkel diktat' to soften austerity requirements and open the door for more public spending that supposedly stimulates economic growth (Hollande, Draghi, Barroso, Schulz). It is curious that these leaders so vehemently call for 'more growth' without explaining how to achieve it from the state spheres - in a free society, where so much depends on private initiative".