IMF tells Spain to introduce wide-ranging labour reforms

City A.M. Reporter
SPAIN must make far-reaching, comprehensive reforms, including labour market reforms, and its economic recovery remains fragile, the International Monetary Fund (IMF) said yesterday.

“The challenges are severe: a dysfunctional labour market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness,” the IMF, led by managing director Dominique Strauss-Kahn, said in a report. “This needs to be complemented with growth-enhancing structural reforms, building on the progress made on product markets and the housing sector, especially overhauling the labour market,” it said.

After a weak and fragile recovery the economy would grow by 1.5-2 per cent in the medium term, it said.

“Our central scenario is one of continued adjustment of the various imbalances with growth rising gradually to 1.5-2 per cent in the medium term,” the report said.

The report was released as Spain struggles to cut a large budget deficit and convince investors it will not face a Greek-style debt crisis.