Nobody is pretending that Spain is out of the woods yet after getting sucked into the eurozone crisis. But the way the economy is performing compared to the rest of the eurozone suggests that the Government must be doing something right in the area of economic policy. Last month, the Bank of Spain said that improving domestic demand was helping to sustain a recovery, and that the eurozone’s fourth-largest economy would grow by 1.4 percent in 2014 and possibly by as much as 2 percent in 2015. Given anemic growth elsewhere in the eurozone, especially in France (predicted 0.5 percent growth this year) and Italy (probably even slower 2014 growth than France) – the second and third-largest economies in the single currency area – it almost looks like boom time in Spain. Why is this the case? Well, economies are … Read More »
A bit of a theme this week: how the powerful like to bully the small and the weak. And we start with Spain, which, according to one senior figure in the Spanish Government, is deprived of EUR1bn every year in tax revenue as a result of Gibraltar’s low-tax regime. Gibraltar isn’t exactly a country. In fact its constitutional status confuses many people. Gibraltar is an Overseas Territory of the United Kingdom, but although Britain is responsible for its defense, foreign affairs and internal security, the Rock is self-governing based on a constitution written in the 1960s. It also has a sort of half-in, half-out relationship with the EU which it entered along with the UK while remaining outside of the common external tariff and EU VAT regimes, something which also probably irritates Spain. Essentially though, Gibraltar is a little piece … Read More »
Spain and Italy are both in tax-cutting mode this week, the former more convincingly than the latter. By the time you’ve climbed to the top of the greasy pole, you’ve probably had to shed most of your principles (if you ever had any) as “not wanted on voyage,” and in any case you can only go as fast as your party and the economy you inherited will allow you.
Despite his rhetoric, Mariano Rajoy certainly didn’t have much opportunity to display any right-wing anti-tax credentials during his first turbulent months in office, when it was a question of preventing the ship from sinking. Now perhaps things are a bit different, and Rajoy’s announcement of job-enhancing social security cuts may have a real impact on the economy, especially since restrictive employment protection laws have been loosened to some extent. Cutting into the … Read More »
Spain’s Rajoy has promised income tax cuts in 2015, so half a cheer for him for at least talking the talk. But will he walk the walk? Perhaps more credibly, the Finance Minister would only say that he is not planning a VAT rise “for now.” If they weren’t politicians, they wouldn’t even begin to consider lowering taxes at this moment in history: the deficit for 2013 was probably just over 6 percent, while debt was 84 percent of GDP in 2013 and is expected to rise to 94 percent in 2014. While these figures aren’t as catastrophic as those for Greece (and Italy’s debt stands at 135 percent of GDP and rising), they are quite frightening. What they ought to do, of course, is to cut public spending, even though that would increase already massive unemployment (26 percent). But … Read More »
I’m going to give an award to the European Union for its refusal to rise to Spain’s allegations against Gibraltar’s low tax regime, alongside the measured acceptance by an EU delegation of new Spanish border controls, which everyone realizes are a tit-for-tat response to Gibraltar’s dumping of concrete blocks into its harbour, for some obscure purpose which may possibly have something to do with fishing. The EU is the only party to this imbroglio that has shown a modicum of grown-up common sense. Gibraltar, encouraged by the UK, and Spain, seem incapable of rational behaviour on the subject of Gibraltar’s sovereignty. What meaning can be attached to the idea of European unity when this 400-year-old squabble is allowed to smoulder on by two of the EU’s largest member states? Spain’s tax complaint was curious, given that Gibraltar’s tax regime has … Read More »