Spain yesterday joined the chorus of European governments announcing aid for their motor industries, unveiling a €4bn ($5.1bn, £3.6bn) assistance plan and boasting that it was second only to France's in its generosity.
The plan was unveiled by Miguel Sebastian, minister for industry, tourism and commerce, who has recently launched a "Buy Spanish" campaign, while denying any protectionist intent.
Most cars made in Spain are produced by foreign companies, but the assembly and component sectors are big contributors to the country's industrial output and exports.
Domestic vehicle sales have collapsed, with car sales down 42 per cent in January compared with the same month in 2008. Renault of France and other investors have temporarily laid off thousands of workers and cut production.
Mr Sebastian said the industry employed 300,000 people, and accounted for 6 per cent of gross domestic product and a fifth of exports. He said the new "integrated automotive plan" would allow the industry to continue being a "strategic sector of the future". State aid would be denied to companies that cut their workforces without trade union agreement.
There was confusion yesterday about the amount of new money being made available. The government had already proposed €800m of relief for the car sector, and at least some of the €4bn plan presented after yesterday's cabinet meeting was made up of previous measures to help small businesses and consumers.
But Mr Sebastian's ministry calculated that the Spanish support plan would cost €26,062 per affected worker, compared with the UK's €16,216 and Germany's €2,307. Only France had done more, with €33,406 per worker.
The combination of falling income and rising expenditure has turned the government budget from a surplus into a projected 2009 deficit of nearly 7 per cent of GDP.
The cabinet also approved an emergency €1.5bn budget cut, spread across most ministries, to help finance the rising cost of unemployment.
Source: FinancialTimes
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Such is the result of treating inflation as the end-result instead of an indicator of economic health. This is nothing more than managing around the metrics. Sure, inflation percentages can be strong armed into the right place, but it actually being a good idea is another story. Prices should be left to fall in recessions, it’s the only way to get things back on track. Trying to maintanin some frequently debunked hypothetical inflation rate ad infinitum will just cause chaos.