The vice president of the European Central Bank, Luis de Guindos, asks the Spanish government for “greater transparency” regarding the modality of discontinuous permanent contracts, which have become very important in recent months following the approval of the latest labor reform. Although he agrees with the Executive that the way of counting them -which has generated some controversy- “has always been the same” and “there has been no change” in this regard, the fact that this type of contract has reached abundance and that its relevance is greater obliges, from his point of view, to carry out this greater exercise of transparency.
The ‘right hand’ of the president of the ECB, Christine Lagarde, wanted to highlight how the behavior of the labor market in Europe is being “frankly good”. In fact, the unemployment rate is at record lows (it fell to 6.5% in October) despite the uncertain global context due to the ‘energy shock’ and the war in Ukraine. Also with respect to the number of hours worked which, according to De Guindos, is the main reference to take into account, even more than the number of employed. It is an “especially reassuring” indicator, she has pointed out, because unemployment is closely linked to the solvency of families.
With regard to Spain, he has given one of lime and one of sand, because during his speech this Monday in the framework of the breakfasts organized by the Forum Europa tribune, De Guindos has considered the agreement sealed between the Ministry of Economy “reasonable” and the banks to try to alleviate the cost of the interest rate rise among vulnerable households and those from the middle classes who may need it, given a situation like the current one of economic slowdown and high inflation, which affects lower-income groups more income due to their greater propensity to consume.
“It is reasonable that the figure of the Code of Good Practices” that was produced in 2012 (with De Guindos in the Government) be used, the former minister assured. “We didn’t do so badly then when the government takes that path now,” he added. At the same time, De Guindos has asked the banks to keep the financing tap open and not to stigmatize these low-income customers.
Interest rates will continue to rise in the Eurozone
Luis De Guindos took advantage of his speech to make clear the issuer’s commitment in its battle against inflation. “We have clearly said it”, highlighted the ‘number two’ of the ECB, who also recalled that the measures that the entity has taken to date to control the rise in prices – the annual inflation rate remained at 10 % in the Eurozone in November, according to Eurostat- are not necessary to reduce them. “There will be more rate increases. I don’t know for how long,” De Guindos has sentenced.
“Let no one doubt that we will do everything possible or impossible so that inflation returns to 2%”, he insisted throughout his speech, also stressing that this commitment from the issuer is the best from the point of view of recovery economy, equality and financial stability. The former Minister of Economy under Mariano Rajoy has stressed that the entity will stop tightening its monetary policy only when it sees that its measures allow it to converge towards its objective of price stability, that is, inflation around 2 % in the medium term.
“But that is not close,” he recalled, after also making it clear that the entity must raise rates at a rate similar to that of the last meeting, when it raised the price of money by 50 basis points to 2.5%, its maximum level since December 2008. At the same time, the ECB will have to continue reducing the strong and excessive liquidity that existed in the financial markets after years of ‘bazookas’ to deal with the various crises. As of June, it will be necessary to see how the balance reduction works, which it will also put into practice because, as Luis de Guindos has acknowledged, there are no previous experiences of what can happen when reducing liquidity.
More global regulation for crypto assets
In reference to crypto assets, the vice president of the ECB has opted to address a “global regulation” of them, making it clear that Europe “cannot play alone” and must have the support of the Financial Stability Board (FSB) or the G20 the club that encompasses the greatest powers on the planet. De Guindos recalled that the European Parliament will approve in the coming weeks a new regulation of what are known as “stable coins”, currencies that are guaranteed by a portfolio that supports their value. However, the most worrying, in his opinion, are those crypto assets that do not have any type of portfolio that supports their value, since this lies in its scarcity. Platforms are also a “danger”, as the recent bankruptcy of FTX has shown.