International Monetary Fund Managing Director Dominique Strauss-Kahn today sought to calm market concern about Spain's financial stability, saying he had "enormous trust" in the country's economy, according to dpa. The austerity measures adopted by Prime Minister Jose Luis Rodriguez Zapatero's government were "very efficient," Strauss-Kahn said after holding talks with the premier during a working visit to Madrid. Zapatero said he had informed Strauss-Kahn about new policies such as labour market and pension reforms which would allow "Spain to overcome the crisis with renewed energy and more strength." Spain will demonstrate its economic solvency by making the stress tests of its banks public after their restructuration process is finished, Zapatero said, estimating that this would happen by the end of June. The reform to make the labour market more flexible was "crucial and fundamental," Strauss-Kahn said, explaining that such measures could lay the foundations for growth in the next two decades. However, it was necessary to wait until the government had applied the reforms, which could "always" be improved, the IMF director added. Spain had an important growth potential which could allow the country to "very rapidly" trim its budget deficit of 11.2 per cent, Strauss-Kahn said. Spain's budget deficit is the third-largest in the euro zone. There has been concern that the austerity measures adapted by the government could stun already sluggish growth, but Zapatero said that did not need to happen, provided the measures were planned and carried out correctly. The European Union and the IMF have dismissed reports that Spain was about to be engulfed by a debt crisis similar to that of Greece.
