Spain seeks to wean economy off construction

MADRID (AP) -- Spain unveiled an ambitious reform package Friday aimed at weaning its troubled economy off the construction sector and nudging it toward a more sustainable growth model.

The 10-year plan features everything from tighter supervision of the financial sector -- and forcing listed companies to tell shareholders how much their executives earn -- to measures making it easier for Spaniards to start up small businesses.

Spain, once among Europe's largest creators of jobs and boasting more than a decade of solid GDP growth, is now suffering its worst recession in decades. It has run up five straight quarters of economic contraction after the collapse of a boom fueled by residential construction. The building sector and related industries had accounted for nearly 20 percent of the country's economic output.

Now, the unemployment rate is at an EU-high of 18 percent after roughly doubling in less than two years, and is projected to hit 20 percent or more. While the broader euro zone has climbed out of recession, Spain is not expected to do so until 2010 at the earliest.

The reform plan also calls for bigger tax breaks for companies that invest in research and development, more help for Spanish exporters and changes that force government agencies and other businesses to pay faster for services or goods bought from private-sector suppliers.

It also boosts vocational training in a country that turns out armies of university graduates who often end up underemployed.

The reform plan was presented by Finance Minister Elena Salgado and Deputy Prime Minister Maria Teresa Fernandez de la Vega and will be debated by Parliament.

Salgado said the plan will turning around the economy over a decade and noted that the current Socialist government may not even be around long enough to see it to fruition. She expressed hope that future governments would respect it. The next election is in 2012.

“It is an ambitious proposal. It presents our citizens with a vision for the country in 2020,” Salgado said after the blueprint was approved at a Cabinet meeting.

The conservative newspaper El Mundo called it “a grab bag” and said it might produce nothing because a market economy cannot be legislated from sickness back to health.

“It might become just a letter to Santa Clause. In other words, just a set of intentions,” the paper said.

However, Rafael Pampillon, head of economic analysis at the IE Business School, said the government is not completely off track. He called Socialist Prime Minister Jose Luis Rodriguez Zapatero's handling of the crisis disastrous so far, saying billions spent on public works projects will have no lasting effect.

But if the government can at least restore confidence in the business community with the plan, companies might start hiring again, he said.

“The important thing for them is to feel comfortable,” Pampillon told The Associated Press. “In the end, they are the ones that change the economic model.”

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