The time has come for an arsenal

IE Focus - The time has come for an arsenalJanuary 2009 | By Gayle Allard, Professor at IE Business School

Exceptional times require exceptional measures, such as deploying an arsenal of fiscal measures. Itâ??s the only way to combat the current economic crisis.

The tax incentive of 1.1% of the GDP approved today by the Cabinet of Ministers might be considered irresponsible at any other time; however, in the unsettled waters of today´s global economy, it is an appropriate move. What are missing are measures for correcting the structural problems that will make this crisis such a serious one for Spain.

The government is facing domestic recession and the almost certain first global recession since 1982. The monetary policy has made its move and the response has not been encouraging. Given this scenario, the European Commission has requested tax incentive packages and Zapateroâ??s government has responded by announcing new expenditure totalling â?¬11,000 million in 2009: â?¬8000 on public works through local authorities and smaller amounts for the car industry, the environment, R&D, the Dependence Act, the refurbishment of buildings and tourism. According to the president, the move will create around 300,000 jobs.

First of all, this package is necessary. At the present time, we should not waste time discussing its effect on the deficit before we proceed. The recession looks to be worse than any known by most of us and normal solutions would be particularly shy.

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