José Luis Rodríguez Zapatero, Spain’s prime minister, said in Davos this week: “We are a serious country and we will fulfil our promises.”

With these words Spain’s Prime Minister sought, during his visit to Davos last week to reassure international investors that Spain, despite the severity of the recession it is currently suffering, and the major challenges facing its banking system, is not about to become another Greece.

Just to prove the point he had Labour Minister Celestino Corbacho and Economy Minister Elena Salgado announce in short order that a) Spanish citizens are going to work two more years each in the longer term, and b) face continuing and sweeping cuts in services and increases in taxes in the short term. The trigger for this rather unexpected show of determination seems to have been the growing danger of contagion from debt crisis worries in Greece, as Spanish 10 year bonds spreads nudged briefly through the 100 base point level over the comparable German benckmark. Unfortunately, enthusiasm for the new-found seriousness doesn’t seem to have lasted long, since this just morning (and only three days after that strong demonstration of will for change) the Spanish press inform us that Elena Salgado – faced with strike threats from the main trade union organisations – is having second thoughts, and is willing to be “flexible”, since the proposal for pension reform, was only that, a proposal which is up for negotiation. Continue reading →