Less than a year ago, the IMF asked Spain to lower wages in order to stimulate growth. Still, six million unemployed workers and a flat GDP show that this strategy was not good enough. Yesterday, the IMF's Managing Director, Christine Lagarde, squeezed tighter when she said that the Spanish government should reduce the tax costs of employing workers but "not necessarily lower salaries."
Businesses are outraged, justifiably, because there is no money to do this. The system has exhausted its capacity to generate more revenue through taxes that will only depress economic growth further. A flat tax is a good measure, but not good enough. To expand once more, companies need to lower taxes across the board until the economy stabilizes.