On July 30, 2010, the Executive Board of the International Monetary Fund (IMF) issued its report on Spain.1 and welcomes the Government initiatives on Financial Institutions, deficit reduction and employment market reforms. Yes, Spain is going in the right direction, and this not just about Football!
The main challenge for the Spanish economy is not its financial stability, which is now clear after last weeks market reaction to the EU Banking stress tests, in which the Spanish Financial sector came as one of the strongest in the EU.
Ending the year 2010 with a public deficit of 9.3% is out of questions. The issue that the government must tackle is the paradigm shift from an economy relying on the construction industry toward improving innovation and the internationalization of the Spanish corporations, which is being primarily lead by the private sector as demonstrated by Banco Santander, BBVA, Abengoa, Telefonica and many other not so well known companies.
Summarizing, the IMF report restates the situation as perceived by most analysts and acknowledge the many challenges and the solutions. The IMF Board welcomes the government initiatives and suggests other necessary reforms. Overall, it seems from the report, what the Market has already understood, the Spanish Economy is heading in the right direction.