Atlantic International Partnership Headlines: MF Says Spain Must Step Up Reform Efforts as Euro Region’s Crisis Worsens

http://blog.atlanticinternationalpartnership-headlines.com/2011/06/iatlantic-international-partnership-headlines-mf-says-spain-must-step-up-reform-efforts-as-euro-region%E2%80%99s-crisis-worsens/

The International Monetary Fund said Spain must step up efforts to overhaul its economy asEurope’s sovereign-debt crisis threatens to damp growth.

“The repair of the economy is incomplete and risks are considerable,” the Washington-based IMF said in its annual appraisal of Spain yesterday. There must be “no let-up in the reform momentum” to bolster the recovery and reduce a 21 percent unemployment rate that is “unacceptably high,” the fund said.

Spain’s Socialist government is carrying out the deepest budget cuts in at least three decades while raising the retirement age and reducing firing costs. Prime Minister Jose Luis Rodriguez Zapatero overhauled wage-bargaining rules on June 10 in the latest step aimed at reining in borrowing costs that surged to the highest in a decade last week on mounting expectations of a Greek default.

“Financial conditions could deteriorate further, reflecting rising concerns about sovereign risks in the euro area,” the IMF said. “This could put additional pressure on sovereign and bank funding costs for Spain, which in turn could feed back to the real economy.”

The IMF called on the government, which has passed two labor overhauls in the past year, to make deeper changes to reduce the highest unemployment rate in Europe.