Economists are asking themselves where the impulse will come from to return an economy like Spain´s to growth.  With monetary policy practically impotent and fiscal policy strapped by high debt, and with no currency to devalue, Spain has few tools to reactivate growth.

One obvious answer is structural reform.  There are plenty of candidates in the Spanish economy for structural reform, the main one being the labor market.  But reforms of this sort, while needed, are unlikely to give an immediate impulse to growth.  The best they can do is set the foundations for stronger and more lasting employment growth once the economy begins to grow again at or near potential.

However, there is a candidate that is not talked about much due to its high potential political cost.  What about a wage cut, like Ireland imposed in the depths of the crisis, and like Portugal is discussing now?  The government could start by cutting its own salaries –larger cuts for higher incomes—and ask the private sector to follow its example.

What a wage cut could do for Spain is to help restore the competitiveness that it has lost over the years, as wages have climbed at rates faster than its trade partners, while productivity has stagnated.  Wage cuts would act almost like a devaluation, giving Spanish goods more attractive prices and making them competitive again in foreign markets.  This would enable Spain to reignite the economy through export-led growth.

Granted, lower wages could reduce domestic consumption.  But with luck, domestic prices would also fall, leaving consumers with similar purchasing power in the best-case scenario.

And the biggest advantage would be that finally markets would see that the government was doing something to boost Spain out of the crisis.  That could mean lower interest rates and easier financing.  And Spanish citizens would see that their government at last was providing leadership and a plan, which could restore confidence.

It´s not a likely initiative, but if the government would take the first step, it might work.


Rubén 16 marzo 2010 - 23:01

Una medida muy acertada, si TODOS los españoles se bajasen el sueldo proporcionalmente y los bancos bajasen las hipotecas proporcionalmente a la bajada del sueldo.
Al final a pagar el pato los de siempre, los tontos que engañaron con pisos hipervalorados, y después de esta medida, los de siempre a comprar pisos a bajo precio.

Fernando Peral 17 marzo 2010 - 10:30

I agree with the author that structural changes are vital to restore growth in the Spanish economy. Of course, one of the urgent changes needed refers to the labour market, and the author’s proposal is more than just a proposal: it’s a dilemma. If wages aren’t cut, the alternative is cuts in employment.

But I’m afraid that, in a global world, that wouldn’t suffice to restore trust in the Spanish economy. The lack of legal security, the arbitrariness of local administrations, the overcost meant by the so-called “alternative energies” and the rejection of nuclear energy to compensate, the overwhelming public expenditure in non-productive investments, the financial support to the automobile industry or the construction sector, the severe deficiencies of the education system, the problem of legislation and practice on language, the increase of VAT on its own, without accompanying reductions in other taxes affecting the economy, etc… all these, which are true obstacles to productivity and reliability, are strong deterrents for both domestic and foreign investors.

I know I depict a quite pessimistic scenario, but it is what more or less all international institutions (IMF, EB, WB,etc…) and investment banks think, and I don’t think those views can be rejected on political grounds or left unresponded.

Josep 19 marzo 2010 - 00:01

Cortar los salarios a altos cargos es una buena medida para salir de la crisis, qué fácil no?
Porque no se ha hecho antes?
Creo que es una falacia lo que dice el artículo. Realmente, bajar los sueldos de todos los altos cargos y proporcionalmente también los de los trabajadores solo provocaria una reducción de costes que conllevarian a un espiral de bajada de precios.
Además, si dentro de esta bajada, añadimos una fuerte competitividad todo desembocará en deflación. Y ya sabemos como acaba la cosa.
Creo que las medidas para salir de la crisis son difíciles de encontrar, y que el gobierno intenta hacer cosas, pero no es tan fácil.
Si lo ven todo tan fácil, porque no se presentan?

Ignacio 10 mayo 2011 - 22:26

¿Que se sale de la recesión con recortes salariales?

Me parto de risa con las chorradas que llegan a escribir algunos. ¡Y sin sonrojarse!

Gayle 10 mayo 2011 - 23:46

Y que te crees que es una devaluacion, Ignacio? Una bajada coordinada de salarios, que ha sacado a Espana de las ultimas crisis. No te partas de la risa.

Gayle 10 mayo 2011 - 23:46

Y que te crees que es una devaluacion, Ignacio? Una bajada coordinada de salarios, que ha sacado a Espana de las ultimas crisis. No te partas de la risa.

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