The OECD has told indebted Spain to boost competitiveness and growth in the face of public spending and deficit cuts.
In its latest economic survey of Spain, the OECD has said the country’s barriers to competition remain too high.
According to the organisation, Spain taxes labour too much and consumption and property too little.
The OECD says Spain should aim to keep wages down by limiting severance payments and the impact of collective bargaining processes such as pay negotiations with unions.
The country must also raise its retirement age and reform its pension system to improve its long-term liabilities, according to the OECD.
The organisation predicts the country’s deficit will be 9.2 per cent this year and 6.3 per cent next year, roughly in line with the country’s own projections. It says the deficit will be as low as 4.4 per cent in 2012.
However, economic growth is projected to be weak next year, with just a 0.9 per cent increase compared with a predicted 0.2 per cent contraction this year.
“The survey recognises that Spain has launched substantial fiscal consolidation plans and significant steps to address long-standing shortcomings in the labour market,” the OECD says.
“The OECD calls for broadening and deepening of these measures, as well as further efforts to remove barriers to competition in products markets.”