Spain relies in renewable energy to fight the economic crisis.

Sources: Financial Times: Zapatero favours “green” stimulus; Spain’s finance minister shuns new stimulus. Diario El Pais: Obama cites Spain as an example of investment in renewable energy. Diario El Mundo: Prime Minister Zapatero assures that Spain has margin to get into debt

As the United States President Barack Obama pointed out in January, Spain is one of the world leaders, with Germany and Japan, in producing renewable energy. Indeed, Spain is already producing 30% of its electricity solely from renewable energy sources, a record when compared with other countries like the United States, which only produces 10% of renewable energy. For this reason, Spanish Industry Minister argues that Spain’s leading renewable energy companies are likely to benefit from the stimulus plan proposed by President Obama, which includes investment in this type of energy. Because Spanish renewable energy companies already have a presence in the United States (although they began to expand five years ago), and these companies stand to benefit from the American stimulus plan, they seen as a hopeful sign for Spanish’s economy recovery.

Motivated by this recognition of Spain’s economic potential, Spain’s Prime Minister Jose Luis Rodriguez Zapatero announced in an international press interview on March 26 that, if the Spanish economy does not show any sign of recovery in a few months, he will launch a round of government spending focused on the renewable energy and biotechnology fields to help Spain’s economy get out of recession. Prime Minister Zapatero assures that Spain has an ample margin to maneuver in the fiscal field because the Spanish debt (38% of the GDP) is already under the European Union average, even though the last economic previsions amount for a 7% of total public deficit. Mr. Zapatero argues that investment in clean energy will give rise to a great structural reform that would help to reduce the high unemployment rate in the country and diminish the country’s dependence to the crude coming from abroad.

Moreover, Mr. Zapatero plans to convince other members of the European Union that making a coordinated conversion to renewable energy could be a good measure to beat the current economic crisis. Since Spain will be the next country to assume the presidency of the European Union, Mr. Zapatero has announced that one of his priorities will be to promote the coordination of investments in new technologies, mainly in renewable energy and biotechnology, because of its potential impact in the economical system.

However, these measures have not been received well by all in the Spanish Government. The Spanish Finance Minister Pedro Solbes, has directly contradicted Mr. Zapatero’s stimulus plan, calling for fiscal prudence. Mr. Solbes argues that there is no room for new fiscal measures in the current economic situation and that other European countries may be reluctant about further deficit spending. In fact, the United Kingdom Prime Minister has already announced that his country will not announce such a big fiscal stimulus in the near future.

Question:
1) Do you think that it is the appropriate time for the Spanish government to engage in more public spending, despite the high level of public debt in Spain?