Pedro Solbes, Spain’s finance minister, said on Friday that there was no room for new fiscal stimulus plans in Spain or the rest of the eurozone, a cautious assessment that puts him in direct contradiction with José Luis Rodríguez Zapatero, his prime minister.

Mr Zapatero, who has headed Spain’s Socialist government since 2004, said on Thursday that Spain would launch a new round of stimulus spending – albeit a smaller programme focused on renewable energy and biotechnology – if previous public spending efforts failed to boost the economy by the summer.

The prime minister pointed to Spain’s “ample margin” on its total public debt, which at less than 40 per cent of gross domestic product is well below the European Union average.

But Mr Solbes – who moved the Spanish budget into surplus from 2005 only to see the global economic crisis and Mr Zapatero’s spending plans plunge it back into deficit last year – has persistently called for fiscal prudence.

Both he and Mr Zapatero say Spain’s 2009 deficit will be “clearly” above the EU’s limit of 3 per cent of GDP, and independent economists expect it to reach 7 per cent of GDP.

“In these conditions, I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” Mr Solbes said yesterday after a cabinet meeting in Madrid.

Ministers in other countries are also getting cold feet about further deficit spending to deal with the crisis, amid signs that investors are nervous about buying the vast quantities of new government debt required. Gordon Brown, the UK prime minister, signalled this week that Britain would not announce a big fiscal stimulus in next month’s budget.

Mr Zapatero, however, is convinced that additional government spending can be helpful in promoting confidence and creating jobs and has come into conflict with Mr Solbes before on this.

Although his government has benefited from Mr Solbes’s presence as an orthodox “safe pair of hands”, Mr Zapatero is said by the pro-Socialist media to be preparing to sacrifice him in a cabinet reshuffle some time after next week’s Group of 20 summit in London.

Mr Solbes, meanwhile, appears exhausted by his efforts to enforce budgetary restraint and has made no secret of his desire to retire.

He joked that he was jealous of Mariano Fernández Bermejo, the justice minister who resigned over a recent scandal, for being an “ex-minister”.

The Spanish cabinet on Friday approved draft legislation to adopt the EU’s services directive, which will involve modifying 47 separate laws and eliminating various regulations in an effort to make the country’s economy more flexible and competitive and less bureaucratic.

“These structural reforms are probably the most important of this parliamentary term,” Mr Solbes said.

Rightwing opponents of the government have criticised Mr Zapatero for focusing on social liberalisation instead of reforming restrictive labour laws.

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