Brussels: The European Commission on Wednesday placed Spain at the head of a list of 12 euro zone economies that are in critical state and need major reform this year.
Spain and Cyprus -- heavily affected by problems in the Greek economy -- were listed as being in “very serious” trouble by the Commission failing prompt action both on public finances and on economic levers most likely to generate wealth and create jobs.
“Spain faces major adjustment challenges following the bursting of the housing and credit bubble,” the Commission said in its annual report on the Spanish economy.
“Major reforms have begun in the areas of fiscal consolidation and fiscal framework, the financial sector, pensions and labour and, to a certain degree, product markets.”
“Spain still faces significant challenges in rebuilding market confidence, securing the sustainability of public finances, reducing domestic and external vulnerabilities and underpinning medium-term growth and employment,” the Commission report added.
“In consequence, there is need to fully implement the ongoing reforms and substantially speed up reforms in the product and service markets,” the Commission said.
Spain is supposed to slash its deficit from last year’s 8.9% to 3.0% of economic output in 2013 but is struggling against a mountain of problems.
It is forecast to be the only euro zone country still in recession next year, around a quarter of the population is unemployed, and its banks are buried under bad debt.
An EU official said earlier that the Commission might decide to recommend giving Spain an extra year to meet its public deficit target.
“We are considering this option and we may announce it today,” the source said on condition of anonymity.