What has broken the dynamics of our economy

After years of unbridled growth, the Spain now saves a severe blow of brake, be presented as one of the sick children in Europe. In a joint interview to the "voices" and "Il Sole 24 Ore", Pedro Solbes, the second Vice-President and Minister of economy and Finance of the Government of José Luis Zapatero, considers that his country, after a year 2009 very complicated, should see the end of the tunnel in 2010.

After years of strong growth, the Spain is today a sudden reversal of trend. Brussels provides a recession. How do you explain this situation

We know a lesser growth on the basis of internal and external factors. The real estate-construction sector, which represents 17 of our GDP, is in crisis, while our financing needs are complicated with the "subprime" crisis, international developments and the oil boom. To say that we are close to a recession, is difficult. I did not discuss Brussels forecasts. After years of growth very high, we know one or two quarters of decline in the growth, with an impact on employment. It should be close to zero in the third quarter growth.

Currently, we maintain the forecasts established in the macroeconomic framework for the 2009 budget that are of a growth of 1.6 this year and 1 next year. But the reality will depend on the evolution of the oil, the interest rate and other factors.

You seem to have been surprised by the sudden deceleration...

In our analysis, the slowdown was to be the result of the only adjustment in real estate. We thought that the financial crisis in the United States merely to the "subprime" sector in which the Spain is not involved. But it is extended to other activities, causing a liquidity crisis. Which resulted in a fall in activity in Europe and Spain. There were a sequence of events that could not provide. Real estate has been an important factor but it was not the only one. We have had a restriction of financing and a significant fall in consumption due to inflation and the rise of interest rates. What has broken the dynamics of our economy.

And Spanish finance

It has the advantage of being well capitalized and display a high profitability. Banks proceeded to supplies exceeding the rules imposed by Basel. There is no in Spain practice of the "subprime". I see no problem occur on the horizon.

How long will the crisis last

With the correction in real estate, 2009 if difficult announcement. But if, as we think, the oil prices stabilize, if there is no negative impacts other types at the international level, if there is no other surprises in the financial field and if it gets the confidence of consumers, there will be a rapid recovery in 2010. The Spain has a greater than 3 growth potential; It has business, the entrepreneurial spirit and the labour for this.

Think you have taken adequate measures

We decided to help families and businesses by easing the tax burden. We are committed to facilitate liquidity in the real estate sector and SMEs. In total, our efforts will amount to EUR 40 billion over the period 2008-2010. We have made many important things. In the light of the challenges we face, I am rather satisfied with our action.

With what effect on the public accounts

In 2009, the State budget will be slightly deficit. By adding the social security and the autonomies, the deficit of the public accounts will evolve between 1 and 2 of GDP.

You would favour more austerity

Conceptually, I support more efforts. But it is already remarkable contain expenditures of the State to 3.5 (excluding measures for employment) while many programmes have been launched on infrastructure or socially as the increase of the lowest pensions, assistance in housing, etc.

What was the Spain need to restart

The Spain need a Europe that goes well because it is very dependent. She needs to be less dependent on real estate as well as in terms of its energy supply. She also needs to be more present in the knowledge economy. This requires structural reforms, less bureaucracy, more competition and more R & D efforts.

What do you think the policy of the ECB

It must allow the ECB to do its job. These are professionals who know their craft. They share our same goal to ensure the best growth medium term for Europe containing inflation below 2. Its interest rate policy meets the specifications. The Spain is very dependent on external financing and this affects us more. At other times, the Bank of Spain would have perhaps been different. What are the advantages and disadvantages in the monetary union.

You discuss the possibility of devaluing

No, I'm a strong advocate of the euro. A currency and a national monetary policy enable faster adjustments but do not forget the benefits for competition, efficiency and liquidity that brings the euro. Thanks to him, the Spain and the Italy enjoyed a period of stability unprecedented with lower interest rates.

What effects do you expect the double decline of oil and the euro

Difficult to fix exchange rates but the euro was extremely high lately. Allowing to fight inflation but penalized exports. The new situation should help Europe to get out of the current phase.