WASHINGTON – A report from a left-leaning economic think-tank here suggests that Spain should privilege growth over austerity in pursuit of reducing its debt-to-GDP ratio.

“The planned budget cuts and tax increases in Spain are not only unnecessary, but socially and economically destructive,” the Center for Economic and Policy Research said in the paper.

Founded in 1999, the Washington-based CEPR’s advisory council includes Nobel Prize-winning economists Robert Solow and Joseph Stiglitz.

Amid Spain’s “depression-level unemployment rates, the government’s first priority should be creating and maintaining employment, not fiscal tightening,” CEPR Co-Director Mark Weisbrot said.

The Spanish jobless rate is currently more than 20 percent, the highest in the 27-member European Union.

Spain’s economic and financial woes are due to the bursting of property and stock-market bubbles, not excessive public spending, the CEPR economists say.

The austerity measures recently adopted by Madrid “could easily leave Spain with a worse debt problem than they would have with a continued fiscal stimulus,” Weisbrot said.

Spain’s ratio of debt to gross national product would not be much higher in 2020 with continued stimulus than it is projected to be under the fiscal tightening now in progress, according to the CEPR report.

The document notes that Spain’s debt-to-GDP ratio shrank from 59.3 percent to 36.2 percent during the economic expansion of 2000-2007 and that interest on the debt amounted to a modest 1.8 percent of GDP last year.

“Continued fiscal stimulus (in Spain) could be financed by the European Central Bank, through money creation, much as the U.S. Federal Reserve has done over the past three years, and the Bank of Japan has done since the 1990s,” the CEPR says.

The report adds that even if Madrid had to finance stimulus through ordinary borrowing, the debt-to-GDP ratio would be no worse than 68.4 percent by 2020, only four percentage points higher than the level forecast in the government’s austerity program.

Spain came under pressure from international financial markets in the wake of the Greek debt crisis and the Socialist government in Madrid quickly embarked on stringent austerity measures to reduce the budget deficit, which reached 11.2 percent of GDP last year.

Besides cutting public employees pay by 5 percent and freezing most pensions, the government enacted a labor-law overhaul that has provoked bitter opposition from unions. EFE