This announcement comes as a blow to the incumbent government so close to the December general election, as it has made deficit reduction a key campaign story.
Spanish finance minister Luis de Guindos may find himself under pressure. After stating that Spain will meet the EU deficit targets of 4.2% of gross domestic product (GDP) this year, and 2.8% next year, he was presumably not expecting the EC to ask for more cuts.
The election is too early to call, but these issues do improve the prospects for anti-establishment parties on both sides of the political divide create some uncertainty.
We remain fascinated by the prevalence of family ownership in the Spanish economy. According to the Family Firm Institute, 85% of companies are categorised as family owned and account for 70% of Spain’s GDP. For example, global retail bank Santander, and fashion retailer, Inditex, which owns the brand Zara, are both family businesses.
Our focus on high-quality businesses run for the long term presents a quandary for us when it comes to family ownership. On the one hand, best practice corporate governance in the UK and much of Europe values board independence above vested interests; while on the other hand, we have met a range of companies that show the value that a long-term or multi-generational focus can bring.
We returned from Spain with a cautiously positive outlook, one we hold for most of Europe. There are signs of a broad based recovery taking place with well run companies developing the goods and services society needs for a sustainable future.
