Spain's new cabinet seen as economic rescue squad


Spain's new cabinet seen as economic rescue squad

Spain's new cabinet seen as economic rescue squad

Thursday, December 22, 2011
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Former investment banker de Guindos given key post of economy minister.

MADRID: Spain on Thursday swears in a new conservative government, hailed as an economic rescue squad to roll out urgent reforms.


Prime Minister Mariano Rajoy named 13 loyal disciples to his cabinet, with a former executive of the ruined US bank Lehman Brothers, Luis de Guindos, in the key post of economy minister.


He and the rest of the cabinet, with notable backgrounds in economic and European affairs, must spearhead efforts to get five million unemployed back to work and reassure investors that Spain is not a weak link in the eurozone.


"The government team Mariano Rajoy has chosen is consistent with Spain's urgent needs ... employment and the need to generate international confidence in the midst of this dramatic panorama," said Antonio Nunez of the IESE business school here.


De Guindos, 51, was Lehman Brothers' executive chairman for Spain and Portugal from 2006 until its collapse in 2008, which heralded the start of the worst of the global financial crisis


He might lack in credibility because of his position as former president of Lehman Brothers Spain, but the former junior economy minister has ample experience in the government, IESE said in an analysis.


Leading centre-left daily El Pais saw De Guindos as a technocrat in a government of friends and loyalists of Rajoy.


Financial daily El Economista said Rajoy was looking for reliability and experience, counting on a technical team of liberal tendencies economically.


Economics professor Cristobal Montoro takes charge of the Treasury, notably tasked with helping to tighten spending by Spain's regional authorities to cut the overall deficit, a major concern for financial markets.


With unemployment at 21.5 per cent and warnings of a fresh recession looming, Rajoy has vowed to pass rapid budgetary, labour and banking reforms.


He has promised to deepen the spending cuts that have already hit hospitals and schools in some regions and have brought thousands on to the streets in protest.


He also wants Spain to take an active role alongside other countries in efforts to stabilise the eurozone, shaken in recent months by market fears over the debts of certain members.


His new Foreign Minister Jose Manuel Garcia Margallo, 67, is a member of the European Parliament, as was Agriculture Minister Miguel Arias.


Rajoy has said he will slash Spain's deficit by 16.5 billion (RM69.45 billion) in 2012, through sweeping cuts, with only pensions escaping the knife.


Rajoy has vowed to stick to Spain's targets to cut the deficit to 4.4 per cent of gross domestic product in 2012 and 3.0 per cent -- the EU limit -- in 2013.


He acknowledged this week that the country may miss its deficit target of 6.0 per cent for this year and warned that if the figure reaches 7.0 per cent, the government will have to make a further 10 billion euros in cuts.


As well as Spain's budget deficit, he must also solve its huge unemployment problem and has vowed to clean up its banks.


De Guindos favours the creation of a bad bank, a state-run structure that would pool the bad property assets weighing down banks since the 2008 housing bubble collapse.


The new cabinet was due to be sworn in by King Juan Carlos later Thursday and hold its first meeting on Friday.