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06/12/2016

Guindos’ reappointment hailed by Eurogroup, Commission

Euro & Finance

Guindos’ reappointment hailed by Eurogroup, Commission

Luis de Guindos

[Council of the EU]

EU officials in Brussels welcomed the confirmation of Luis de Guindos as Spain’s economic affairs minister for a second term. The man is considered as an “extremely able” envoy of the Madrid government.

Guindos has been “a very vocal, clear and analytical” representative of the Spanish interests, a senior Eurogroup official said on Friday (4 November).

It is in the interest of Spain to continue with Guindos as minister, the official added.

Guindos, a former Lehman Brothers advisor, was expected to continue as Spain’s Minister of Economy and Competitiveness.

But Prime Minister Mariano Rajoy (Partido Popular) did not offer him a vice-presidency, as some rumors suggested, nor did he extend his portfolio to include finance.

Spain's Rajoy appoints EU-friendly Cabinet

Spain’s leader Mariano Rajoy, starting a second term after months of political paralysis in his country, formed a new cabinet last night (3 November) that looks set to maintain controversial economic reforms and cement EU ties.

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The European Commission also welcomed the news.

“He is the most credible anchor of fiscal and economic stability for Spain to the outside world,” said Juho Romakkaniemi the head of cabinet of Commission Vice-President Jyrki Katainen, in comments made on Twitter.

Sources close to Commissioner for Economic Affairs, Pierre Moscovici, noted that there is a “very good relationship” with Guindos.

The Socialist Commissioner turned the page on the dispute over the deficit figures last year with Spain’s right-wing government.

Moscovici was attacked by members of the Partido Popular when he disagreed with the deficit projections published by the Spanish government.

“The Spanish government framed me,” Moscovici lamented in an interview last April, saying he was used as “scapegoat” in national politics.

Commission rebukes Moscovici's hawkish stance on Spanish budget

The European Commission decided on Tuesday (6 October) to postpone a negative opinion on the Spanish budget for 2016, contradicting Economic and Taxation Affairs Commissioner Pierre Moscovici, who had told the press otherwise.

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His reappointment also was seen as “excellent news”, a German official noted.

The same source recalled the good cooperation between Guindos and German Finance Minister Wolfgang Schäuble.

Brussels battles

Brussels will take up an important part of Guindos’ agenda for his first week of the new term.

On Monday, he will explain to his colleagues in the Eurogroup meeting how the minority government intends to reach the deficit target of 3.1% of GDP for next year.

The Partido Popular’s new minority government needs to pass more than €5 billion (0.5% of GDP) in cuts and new taxes as part of the effort, as the EU institutions requested  last summer.

The European Commission allowed Madrid to submit a draft budgetary plan for 2017 without the adjustments requested as it was a caretaker government. But the executive urged the upcoming new government to send a new one as soon as it takes office.

Last month, Guindos was confident in reaching an agreement with the liberal party Ciudadanos and the Socialists “quite rapidly” in order to announce the amended budget for 2017 by early December.

The Eurogroup is expected to discuss the situation of the Spanish economy on Monday.

On Tuesday (8 October), Guindos will appear before the MEPs to explain what measures Spain has taken in order to balance the public accounts this year, and to avoid the suspension of part of the structural funds contemplated as part of the sanctions for breaching the fiscal rules.

MEPs oppose 'immoral' suspension of EU funds for Spain and Portugal

A broad majority of MEPs spoke against freezing EU funds for Spain and Portugal at a European Parliament session late on Monday (3 October), saying such a decision would be “immoral”, “unfair”, “counterproductive” and even “illegal”.

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Background

In 2013, Spain received three extra years to cut its deficit below the mandatory 3% of GDP of the pact.

Despite the fact that this was the third time Madrid had been granted leeway since 2009, the deficit reached 5.1% of GDP in 2015, higher than previously announced.

EU declares Spain, Portugal in violation of deficit rules

The European Commission on Thursday (7 July) officially declared Spain and Portugal in violation of the EU rules on government overspending, the first step towards unprecedented penalties against members of the 28-country bloc.

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The European Commission's latest forecast predicts that the Spanish deficit will be 3.9% of GDP this year and 3.1% in 2017.

In April, the executive and the ECB concluded that the needed progress on fiscal consolidation in Spain "has come to a halt, with part of the structural adjustment implemented in earlier years being reversed".

Timeline

  • 7 November: Eurogroup meeting
  • 8 November: Ecofin Council and European Parliament's meeting with minister Luis de Guindos and  Portuguese minister Mario Centeno
  • 9 November: Autumn economic forecast.

Further Reading

European Commission

  • Opinions on "no effective action" taken by Spain and Portugal to meet their Stability and Growth Pact targets.
  • Country-specific recommendations on Spain and Portugal.
  • Spring economic forecast.

Council of the EU