Prime Minister Rajoy, who is not a pro with the press, armored himself in a press conference last week with good growth numbers from recent economic studies and the Survey of the Active Population.
The economy was the main topic of a euphoric speech in which Rajoy made it clear that growth in GDP (0.6% in Q2, which is the biggest quarterly increase since 2007) and employment (more jobs were created than cut) was not a random uptick, but a sign that "the recovery has come to stay." The figures are solid and reflect that the government's policies have put it on the right track. But they are not enough.
At this point, the government can't afford to get self-satisfied. Rajoy knows that these reforms need more fuel and deeper work if the economy is to recover. In other words, the reforms are half-done and weaker than they could be, yet Rajoy is trying to pass them off as complete. The tax cuts are not stiff enough, and government is not enacting a cut to social security contributions that would help companies create jobs and build wealth.
With the exception of labor and financial sector reforms, which were two successful reform agendas, the rest of the government's work was heading in the right direction, but ultimately fizzled out. The crisis did not change Spain's economic model, and with its real estate sector crippled, it is relying too much on tourism. This will not work in the long-term, because tourism depends on cheap and part-time labor. A serious long-term solution is not obvious at this point, yet people remain optimistic about the future for some reason.
