The Banks of Spain's governor made it very clear yesterday that he is separate from Rajoy and his team. While speaking calmly and thoughtfully in front of Congress, he shelled out myriad criticisms of the 2013 budget.`
The Banks of Spain does not agree with the executive's prediction that the economy will shrink by 0.5% in 2013. It thinks that things will worsen and the Spanish economy will contract between 1% and 1.5%. Besides the difference of opinion about falling GDP, there is also disagreement about methods for calculating profits and losses. If the economy grows less than the Ministry of Finance says, the 2013 deficit could grow more than the 4.5% that's expected. Further, the governor warned that Spain might not meet its deficit objective this year and to avoid this mistake it should take additional measures just in case. For the same reason, he criticized raising pensions that, according to Linde, ought to be frozen. He also disagreed with raising taxes. The Bank of Spain doubts that the government can raise as much in tax revenues as it hopes if GDP falls more than expected.
In summary, the governor presented an amendment to the 2013 budget. The executive and parliament ought to look closely at the Bank of Spain's warnings and use the legal process to improve it as soon as possible. It will be important for them to listen to sound advice when it is given, especially because we are close to a bailout that, as the governor himself said, will be different than bailouts in Greece, Ireland and Portugal, but Spain still needs to put itself in a good position to face bailout conditions.
In the words of Marta Currás, Secretary of State of the Budget, that means meeting its deficit goal.
