The Spanish government is waiting on the EU to relax its stringent budget and deficit requirements. Spain expects the EU to raise its deficit objective by one point for this year, from its current level of 4.4% to a less demanding 5.4%.
This move means that Spain can afford to make 10 billion euros less in cutbacks, which is opportune considering that it has recently been confirmed that the country's national debt was greater than anticipated and economic growth will be negative for the near to intermediate term.
Yesterday Rajoy appeared with Monti as growth predictions across Europe were slashed. Both leaders want to pressure the EU into relaxing their nation's deficit goals. In this vein, eight countries have signed a letter that encourages the EU to increase its focus on stimulating the economy. France and Germany did not sign.
Little by little, a plan for repairing all the holes in the ship is shaping up. If successful, the proposal that the ICO finances government debt so that companies can pay it would mobilize a good portion of the 40 billion euros that are owed.
Further, the labor reform could impart some flexibility and confidence to businesses after the economy bottoms out in 2012 and then starts to stabilize.
It is still necessary to pull the financial industry out of their troubles so that companies can get the credit they need when signs of increased activity and areas for growth start to appear. The pieces of the puzzle are being collected slowly, but the work of putting everything together will be long, arduous and riddled with risks.
