Spain Central Bank Chief Warns on Budget Targets - Assignment Example

In an economy that is suffering from the economic crisis, austerity is not an option for the managers of that economy. However, even as austerity is chosen as a way to bring the economy back to its feet, it must be considered that some aspects of austerity may actually lead to more dangerous outcomes for the economy. This is what Bank of Spain Governor Luis Linde is arguing in his speech to the parliament is trying to explain (Jonathan, 2012). If for instance, the government reduces pensions to pensioners, the ripple effect in the economy would be increased inflation and decreased market confidence by both local and foreign investors. For this reason, it is increasingly important that the government know exactly what to do in order to avoid making a bad situation even worse. Linde argued that for budget for the coming year will have to be optimistic as this is the only way to recreate confidence. This is true, considering that what the economy is looking for in investor confidence to allow increased economic growth. Read More