Spanish austerity

by Russ Roberts on June 19, 2012

in Stimulus, Uncategorized

Angel Martin Oro in the Wall Street Journal provides some useful data on Spanish spending in recent years:

While government spending has now fallen from its peak levels of 2009, let us consider a longer time frame with the following data—which come from a recent comparative study of fiscal policies during the Great Recession, published by the Economic Trends Reporter of the Spanish free-market think-tank Instituto Juan de Mariana:

• In 2011, total public-sector spending in Spain was 13% higher than in 2007, and almost double what it was in 2000.

• From 2007 to 2009, Spain’s budget balance deteriorated by 13.1 percentage points of GDP (compared to 10.3 percentage points in the U.S. and 4.3 percentage points in Germany), as a result of both increased spending and a fall in revenues. Since then, so-called fiscal consolidation has only improved the public balance by 2.3 percentage points (versus 3.5 percentage points in the U.S.).

• From 2007 to 2011, government spending as a percentage of GDP has increased by 4.4 percentage points in Spain, more than double the equivalent measure in Germany (2.1 percentage points).

• The public-debt-to-GDP ratio in Spain has risen by 90% since 2007, compared to a 50% increase in the U.S. and only 25% in Germany.

In the current debates on fiscal policy in Spain—fallaciously expressed as a contest of austerity versus growth—it is often forgotten that during 2008 and 2009 the then socialist government implemented one of the biggest stimulus packages of all developed countries, comparable only to U.S. stimulus levels.

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