"needs far-reaching and comprehensive reforms The challenges are severe: a dysfunctional labor 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 sees an outlook of a weak and fragile recovery which the policy agenda being based on rebalancing the economy and boosting confidence. The point is made that a radical overhaul of the labor market is urgently needed as it is not working with an excessively high umemployment figure.
The IMF notes that an ambitious fiscal consolidation is underway to reach the three percent of GDP deficit target by 2013. To achieve the 10 percent improvement of the GDP from 2009 to 2013, the Spanish government has taken a wide range of measures, including the fiscal package approved by the Cabinet last week. The IMF supports the package.
Spain faces strong spending pressures over the longer term due to aging and slower population growth, therefore bold pension reforms should also be implemented soon. The IMF notes that the government has outlined possible reforms, including raising the retirement age to 67.
It is reported that the banking sector is sound but remains under pressure, with a need to accelerate a programme of consolidation and reform to reduce overcapacity and produce more robust institutions.
The full IMF mission statement can be read here.