Can Coupons Save Spain?

Photo: Artbox Images

Spain may get relief for its banking system this week but its broader economy is likely to remain mired in something like a depression. With youth unemployment hovering around the fifty-percent mark, there’s a serious danger of an entire generation being lost to permanent semi-poverty.

Joel Kurtzman of the Milken Institute has a creative idea: rescue the economy with coupons .

Suppose the Spanish government were to sell coupons priced in euros to persons or companies that are not Spanish. These coupons (they could be in the form of smart cards, smartphone apps or online apps) could be sold at a discount to face value of, say, 20 percent. Suppose, further, these discount coupons had a one year expiration date, at which time the discount disappeared.

If Spain did this, Europeans who were considering the purchase of a Spanish retirement apartment, or going on a Mediterranean vacation, would have an incentive to make their purchases quickly. Companies in Europe wanting to import Spanish pharmaceuticals, wind turbines, auto parts, wine, and foodstuffs, would also have an incentive not to dawdle. Sales of cheap Spanish goods and services would most likely soar, helping revive Spanish growth and job creation.

While Kurtzman’s solution deserves extra-credit for creativity, I’m pretty sure this scheme amounts to an export subsidy that would be prohibited by Spain’s World Trade Organization commitments. An expansion of the coupon program to include domestic buyers would take away the export subsidy problem but it would also vastly increase the expense of the program. With credit markets already skeptical about the solvency of Spain, this is probably a nonstarter.

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