“We made the major structural reforms when we found ourselves with a risk premium at levels that were going to intervene and we changed the Constitution in a week.” The reflection is made to this newspaper by Valentín Pich, president of the General Council of Economists (CGE), in line with the measures that in his opinion our country must adopt to tackle a deficit that according to his calculations will not drop this year from 4.9%, a debt at historically high levels (above 1.5 trillion euros, the equivalent of 116% of GDP in November) or an unemployment rate that doubles that of our European neighbors.
In the current context, the macroeconomic data is relatively good given the situation of uncertainty and the slowdown in activity throughout the world; there is hardly any labor conflict -unlike what happens in neighboring France-; Tax collection registers record figures and Spain has an electoral rally ahead of it in the coming months, with the municipal and regional elections in May and the general elections at the end of the year. Faced with a situation like this, in which the country also assumes the rotating presidency of the EU next semester, there is no incentive for the government to approve the necessary structural reforms.
From his point of view, none of the packages that are currently on the table include changes of sufficient depth to put an end to the chronic problems that have been plaguing the national economy for decades. Measures such as an in-depth pension reform that goes beyond “hot cloths” when it comes to addressing the sustainability of the system. Changes that would also go through a reform of regional financing that would provide more transparency to the current model.
Bet, likewise, by a reform of the Public Administrations that would reduce the number of city councils, that would urge others to come together to provide certain services or that would reduce the number of councilors and public offices; as well as a profound change in the Law on Universities that, among other things, would make it possible to modify its governance. According to the president of the economists, another of the focuses of action should be in the real estate field: providing the country with a stock of public housing for rent that is ambitious enough to respond to demand in the next twenty or thirty years.
The economic tsunami that many expected has not occurred
The president of the CGE himself demanded “bold” measures from the Executive during the presentation on Monday of his ‘Financial Observatory’ in which they foresee that the Spanish economy will grow this year at 1.5%. This forecast, which improves its previous calculation by half a point, is somewhat more pessimistic than that of the Government (2.1%), but is above those of the Bank of Spain (1.3%) or the European Commission (1 %). The economic “tsunami” that many research services and economists predicted has not occurred and the data points to a slowdown, but not a crash or technical recession between the end of last year and the beginning of this one.
The labor market has held up, not only in Spain but throughout Europe, with the creation of close to 500,000 jobs in the last year, although the progress has begun to suffer in the last month. The general inflation rate (5.7%) was the lowest in the Eurozone in December and for the second consecutive month, recalls Pich, and the situation of the financial system (with the delinquency rate at its lowest since 2008) has little to do with that of the last financial crisis. It goes without saying that of households and companies as far as their level of indebtedness is concerned. “There are no incentives to make reforms that are painful,” insists the president of the economists.
Valentí Pich acknowledges that there have also been successful measures from the economic point of view, although he fears that they have not been ambitious enough. Henceforth, efforts could not be focused on tackling the problem of public debt. Especially when the European Central Bank is going to go from being a net buyer of sovereign debt to a net seller of the bonds that it accumulates in its balance as of next month of the year. If Spain does not do its homework, it may find itself with a rise in the risk premium, in its financing costs, at a time when investors are going to look closely at the situation of the economy.