The government's denial that minister Luis de Guindos stated that the government would approve a 4 billion euro spending cut on Friday was not a mere misunderstanding. On the contrary. A day from now president Mariano Rajoy will address uncertainties and various points of view held by his two main weapons in government: De Guindos and the Minister of Finance, Cristóbal Montoro.
Rajoy is facing a Hamletesque doubt: enact big cutbacks starting now or delay some of the more drastic measures until March, after elections in Andalusia. There are justifications for both approaches. The former values starting strong from the beginning, which demonstrates a more solid character from an economic and political perspective compared to further delays.
De Guindos is backing the first option, because he believes that cutbacks need to be applied urgently in January in order to avoid further market tensions. For his part, Montoro, who seems to have some backing from the head of the Economic Office, Álvaro Nadal, is conscious of the fact that Spain have to refinance 50 billion euros during the first four months of 2012 and that the next debt payments that Spain has to pay are in February and April and add up to 14.5 billion and 21.5 billion euros, respectively.
Delaying the decision to adopt necessary cutback measures to meet Spain's deficit objective could sow strong seeds of doubt in the markets, which are increasing their pressure on the Spanish economy in addition to creating doubt in Germany in France about Spain's ability to meet their agreements. These agreements were a central component of the Partido Popular's agenda and Rajoy's inaugural speech.
