RUTHFULLY YOURS

By JOSé MARIA AZNAR

Spain faces a critical economic situation. Along with Portugal, it is now at the center of Europe’s financial turmoil. Investors are assigning higher default risks to the Spanish government’s debt than at any point since Spain entered the euro zone.

In the social sphere, the situation is distressing. The unemployment rate exceeds 20%. The youth unemployment rate is above 43%.

It’s not only the financial markets that are raising doubts about the Spanish economy. The European Commission has stated its worries about the current government’s ability to react and implement credible economic measures to address the situation.

Wherever I go, people ask me the same questions: What’s wrong with Spain? How is it possible that in just a few years my country went from being the “economic miracle” of Europe to the “economic problem” of Europe? What happened to the economy that just a few years ago grew more than 3% year after year, even when Germany, France and Italy posted zero growth? It is now the only economy out of Europe’s five largest countries still experiencing negative growth.

All these questions bring me great sorrow and provoke a deep sense of concern for the present and future of my country. Just six years ago Spain was creating six out of 10 new euro-zone jobs, its government accounts were in surplus, its stock of public debt was decreasing swiftly, and its multinationals were expanding across Europe, Latin America and the United States.

My response to all the questions about Spain is clear: Spain is suffering the most serious political crisis of its recent history. The economic woes and the lack of confidence in Spain are the result of the government’s credibility deficit. The high price being paid now by the Spanish people is what happens when politicians refuse to acknowledge their mistakes.

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Bloomberg NewsSix years ago, the country was creating six out of 10 new euro-zone jobs.

The roots of Spain’s crisis lie in the political decisions made in 2004 to abandon the modernizing process that Spanish society began more than 30 years ago. At that time, Spaniards decided by consensus to consolidate our democracy and its institutions after nearly 40 years of dictatorship. The next step was to enter the European Union and later the euro, and converge economically and socially with the most thriving nations of Europe.

Then in 2004 Madrid changed direction. The government rejected the settlement embodied in the 1978 constitution and ruptured the makeup of the Spanish state. Different areas of the country were pitted against each other. The effect has been to erase much of what joins us as Spaniards and to turn Spain into a country that is very difficult to lead.

In the economic sphere, once Spain adopted the euro and currency devaluation ceased to be an option, the government abandoned its commitment to budget stability and the constant process of reforms necessary to remain competitive in global markets. These economic errors can be seen in the government’s arbitrary interventions in business life, with flagrant contempt for the rules of the game—even the European rules. We also saw unprecedented growth of government spending and in tax hikes across the board.

Spain’s current place in the international sphere reflects its declining weight in the world. The government has relinquished its responsibilities and has failed to defend its national interests abroad.

Only a new government can recover credibility, and that demands general elections.

A new government could call on the Spanish people to undertake a great national project for recovery, regeneration and reform of the nation. For this there are no miracles or shortcuts—there never were in the past and there won’t be now. With a new national political project and the implementation of the appropriate policies, Spain can recover international confidence and credibility and Spanish people can recover confidence in themselves and in their nation.

An essential part of this political change will be for Spain to immediately acknowledge that the state has to limit its economic and social role, and open new areas of freedom and dynamism for society and private entrepreneurship. Spain needs to accomplish deep reforms in its administrative structure, including eradicating bureaucratic and public bodies and rationalizing public expenditure. Spain cannot delay any longer in reforming its welfare state, but must start now to restore the conditions for a thriving society that is open to all.

Spain is more than capable of becoming, once again, a dynamic and enterprising country, one that generates employment and opportunity. But first it must undertake the hard work of unwinding six years of political misdeeds. We can’t wait.

Mr. Aznar is the former prime minister of Spain (1996-2004).