Rodrigo Rato, Deputy Prime Minister & Economy Minister, Spain
Against the backdrop of middling economic growth in the eurozone and widening budget deficits threatening the Stability and Growth Pact, Spain has bucked the trend again and is expected to report solid growth of 2.3% in 2003. This year, analysts expect the economy to expand by 3%, easily outpacing the eurozone average of 1.8%, according to the Organisation for Economic Co-operation and Development (OECD).
“As global recovery emerges, Spain stands out as the major euro area country where the pick-up is most evident. This overall performance is a tribute to the two pillars guiding economic policy: a stability-oriented fiscal policy and the pursuit of structural reforms,” said the International Monetary Fund (IMF) in November.
Many contributed to Spain’s success but one man stands out as a bigger piece of the puzzle than anyone else: deputy prime minister and economy minister Rodrigo Rato, The Banker’s global finance minister of the year. Although the country’s economic turnaround did not begin last year – the starting point can be traced back to the mid-1990s when the government implemented key structural reforms – what made 2003 stand out was the widening divergence between Spain and its bigger eurozone neighbours, a just reward for Mr Rato’s long-term thinking.
Mr Rato has been key to the country’s economic policies throughout Prime Minister José María Aznar’s eight years in office. In that time, the economy has created four million jobs, has grown at one of the fastest rates in Europe and has become a major investor in Latin America. Mr Rato has been responsible for the party’s economic policy since 1982.
Key reforms include promoting competition, managing public finances better, lower taxes, deregulating the labour market and privatising state-owned enterprises. Job creation raised incomes, boosting consumption expenditure and a construction boom, all adding to growth. The small and medium enterprise sector also received government support and a strong boost.
Last year, yields on Spain’s 10-year government bonds dipped below the return on the equivalent German security, a telling indication of Spain’s growing reputation. Not least, it is a ringing endorsement of the country’s fiscal and economic policies. Of course, Spain benefited from entry into the euro, eliminating overnight any exchange rate risk. But its budget balancing act, compared with Germany’s widening deficit, ensure the Spanish bonds are hot property.
Last year, Mr Aznar ended speculation and chose his second deputy Mariano Rajoy as the candidate to succeed him for the general elections scheduled for March. Mr Rato’s supporters, who credit him with Spain’s economic success, were disappointed but he will have plenty to keep him busy. The persistent inflation differential inside the eurozone (2.7% versus 2.1%) is worrying as it erodes competitiveness progressively. It highlights the need for continuing labour market reforms and for strengthening competition in certain sectors. Despite job creation, Spain’s unemployment is still among the highest in the OECD at 11.7%.
