Depending on which European leader one listens to, Spain is either no longer at risk of being dragged down by the Greek default débâcle, or else in serious need of making a renewed bid to restore market confidence.
French President Nicolas Sarkozy on Sunday praised the "enormous efforts" made by Spanish Prime Minister José Luis Rodríguez Zapatero and the "responsibility" of opposition leader Mariano Rajoy in dealing with the economic crisis. "Spain is no longer on the front lines" of the euro-zone debt crisis, said the French leader after an emergency meeting of the European Council in Brussels to discuss solutions for the single-currency bloc. Another meeting is set for Wednesday.
But a day earlier, German Chancellor Angela Merkel demanded more action from the Spanish government. "Spain has done a lot, but it will probably have to do much more to restore market confidence," she warned.
Spanish government sources reacted to Merkel's words by pointing out that Spain has already taken "additional measures" to ensure that the public deficit target of six percent of GDP by the end of 2011 is met. "The supplementary effort that Merkel is demanding has already been made," said sources at La Moncloa, the seat of government.
Since July, the Socialist government has taken steps to save around 7.65 billion euros, including the auctioning off of radio spectrum frequencies (two billion euros), a reduction in borrowing costs over initial forecasts (two billion euros), swapping to generic from brand-name drug prescriptions in the public health system (400 million euros), early collection of corporate tax (2.6 billion euros) and reduced ministerial spending (650 million euros). All this, said the sources, gives the government a "financial cushion" to compensate for regional governments' likely deviation from deficit targets.
Spain arrived in Brussels expecting to be admonished along with Italy over its fiscal imbalance. In the end, it was only Italy that was unanimously scolded by EU leaders for not doing enough to curb the deficit.