EU uses "carrot and stick" policy

Today the markets experienced euphoric highs, the risk premium fell and the EU's criticized Spain for having so much work to do with its economy. The confluence of events seemed like a contradiction.

The European Commission reminded Rajoy and the Spanish government that the Spanish budget has many imbalances still, that the nation's recession will last until 2014 and that a long list of reforms are still pending. The EU also noted a lot of redundancy in the country's labor market, which will keep unemployment above 27%. It is necessary to extend labor reforms if the job market is to improve. At this point, the Spanish government should not turn deaf ears to the EU's reprimand, because leaving the work half-finished will compromise the sacrifices that made so far and leave Spain unprepared for the recovery when it finally arrives next year.

The EU is going to give Rajoy more time to meet the deficit objective -- as it did for Portugal and Ireland -- but first it wants to assure that he is seriously committed to transforming the country. In the EU people are convinced that if European countries cannot manage their structural deficits, then the region will risk its currency and recovery ? both things that across the Atlantic the United States has been able to stabilize. Budget cuts announced yesterday by Barack Obama, the security that money will continue to flow in the US and rising Japanese stocks drove peripheral European markets