Spanish Prime Minister Mariano Rajoy held a fruitful string of meetings in Brussels yesterday. In his first meeting of the morning, he sat down with the president of the European Commission, José Manuel Durao Barroso, agreed that this would leave the door open for Spain to hold a "discussion" about the length of time it can take to shrink its national debt. For now, Spain will have to end the year with a 4.4% debt to GDP ratio and end 2013 at 3%.
Barroso seems to understand the reality of Spain's situation and that Rajoy's proposal will help Spain navigate an upcoming recession and the surprising 2% gain in national debt that resulted when the new government realized that Zapatero had inaccurately reported on this figure before stepping down last year. "It would now be appropriate to hold a discussion that, with regard to Spain's situation, aligns with Eurogroup and Ecofin," Barroso said in statements to the press.
Renouncing his ability to take action against nations that do not comply with austerity programs, Barroso is opening the way for the Spanish government to initiate a deal with economic Ministers in order to develop a new roadmap. "Spain is critical for the stability of the eurozone."
"It is important that the new government strikes up a constructive conversation with its European partners, including the Commission, and expound its reform plans in a detailed and scheduled manner," said Durao Barroso.
This understanding does not come from the superintendent of Economic Affairs, Olli Rehn, who is maintaining an orthodox position of maximum austerity out of fears that any backslide would cause the markets to batter Spain. Minutes before Barroso and Rajoy made an appearance, a spokesperson from the European Commission indicated that it would not be sensible if the EU should show signs of relaxing their requirements two months after having forced countries to abide by austerity programs.
