As far as reputations go, Gordon Brown is not the only one who has managed to look good in the face of the global economic meltdown. Spain and its socialist government have looked confident and decisive in response to the crisis.
Unflappable Pedro Solbes, the finance minister, resisted the kneejerk unilateralism of Ireland's blanket guarantee of savers' deposits, arguing early on that Europe needed to adopt a coordinated response to the world's credit crunch. However, when initial attempts to thrash out a European consensus failed, Spain was quick to unveil a national strategy.
Next Monday, a special parliamentary session will be held to approve the government's measures: to offer bank guarantees for new debt of up to €100bn this year (and the government has already indicated it is likely to make available around the same amount next year) and to set up a fund of up to €50bn to buy assets from banks in order to keep credit flowing to the economy.
Spain's main opposition party, the conservative Partido Popular (PP), is broadly in favour of the measures, which is unsurprising as they are similar to those being introduced by other European countries and followed a meeting of José Luis Rodríguez Zapatero,the prime minister, with some of the country's largest bankers, including those from Santander and BBVA.
But it's high time to focus on the nitty-gritty of the plan. "The conditions which the economy ministry is going to establish so that banks can benefit from this guarantee are still unknown," points out Wednesday's business daily La Gaceta de los Negocios.
The Spanish taxpayer has a right to know what kind of assets the government will buy with the emergency fund, how the process will be run, their interests protected and whether the funding will reach "the real economy" – including families and small businesses hit by tighter lending and the increase in the Euribor.
The government has said the fund will be used only to buy "high quality assets at their real value" and that eventually it will stimulate the market, so that it does not cost the taxpayer a cent. Critics have viewed these assurances with scepticism. "Why are we going to give banks this large sum of money without asking what they are going to do with it, as Solbes proposed we do on Friday?", wrote Santiago González in right-of-centre El Mundo. "Let's apply the same lack of trust which they apply to us when they gave us loans."
The largest Spanish trade union, the CCOO, made its own proposition to ensure the country's borrowers reap some of the benefits of the bank guarantees – it proposes banks which get public aid be obliged to cut their interest rates on mortgages (on average 5.477% in October) to the ECB's lending interest rate, which is currently 3.75%.
Whether accepted or not, the proposal is a reminder that beyond the liquidity squeeze facing banks, the Spanish economy faces a home-grown crisis of its own. While Spanish banks have boasted they are not saddled with fancy derivatives of dubious value, many face rising defaults on mortgages and consumer loans issued at the height of Spain's decade-long building boom and have to compete for business in a less dynamic economy.
History will ultimately rate this government on its ability to implement some painful and unpopular economic restructuring, to drive up productivity and create wealth and jobs beyond the empty houses which litter Spain's coasts and many of its cities.
Source: Gaurdian