IMF Pessimistic About Spain

24/7 Wall St.

Less than a day after Spain disclosed that its unemployment rate reached 24.6% in the second quarter, and just weaks after its neighbors agreed to bailout of its troubled banks, the IMF issued an extremely a pessimistic report on the sourthern European nation. The report said nothing that the international capital markets have not already expressed as they exit Spain’s sovereign debt at a pace which has cause the country to pay interest rates above 7% on two-year notes.

The IMF report included this obvervation:

The government seeks to strike a balance between the need to cut back the deficit and boost economic growth in three ways.

First, by making sure the measures to reduce the fiscal deficit are as growth-friendly as possible. One example of such measures would be increasing the revenue derived from the value-added tax, rather than cutting productive spending. Raising the value-added tax has a less negative effect…

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