|Spain's central bank issued a stark warning to the country's government Wednesday, saying there is no more room to revive the economy with fresh spending.|
In an interview, the Bank of Spain's chief economist, Jose Luis Malo de Molina, also cautioned that any additional fiscal stimulus would have scant effect on the economy and require big spending cuts down the road to right the country's finances.
The margin for new spending or tax cuts is "nonexistent" unless new measures to cut the budget deficit in the medium term are taken, Mr. Malo de Molina said. Failing that, "we will find ourselves in a situation where we have to apply restrictive measures when the economy is still in a phase of contraction," further deepening the slump.
He neglects to explain or even mention that Spain is no longer a sovereign, currency issuing nation, so it does not have the ability to deficit spend without limit. Spain and other Eurozone member states are all functionally like a states within the United States. If they're strapped for cash, they're strapped for cash. They can't credit bank accounts like the Federal Gov't can.
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