The reintroduction of fiscal rules is coming with a 2025 and 2028 shock plan as a central policy for the management of public accounts in the euro zone. It is not that they had been abandoned but they were being somewhat ignored, to such an extent that the president of the European Central Bank (ECB), Christine Lagarde, had to stand firm to demand from European governments that it is time to reduce the debt. Despite the sophisticated disguise of flexibility and room for maneuver that has been put on the agreement, the main consequence is that cuts will arrive to once again comply with the pillars of the euro: a target public deficit ceiling of 3% and a public debt of 60%. % of GDP. We are far, very far away, but there is no choice but to begin to travel a long path that should begin with dissemination.
Let’s get down to the basics. For example, you can start by explaining that the deficit means that the government of the day has spent more than it earns. We would continue to say that public debt grows because we have to borrow to finance that recurring unpaid bill and that joy in spending. Due to ignorance, omission or bad faith, there are certain politicians who look the other way with the basics. Public debt is at 110% of GDP after falling from 120%. However, the account to be repaid has only grown to 1.57 billion euros. The decrease in percentage occurs because GDP increases. What will happen to the debt/GDP ratio when the expected weak growth reverses?
Adjustment, the euphemism for cuts
Resolving the expenditure and income equation continues to be the pending issue of the Government of Pedro Sánchez, which is now beheaded in the Ministry of Economy with the departure of Nadia Calviño to the European Investment Bank (EIB). starting next January 1st. It is surprising that Moncloa wants to keep the intrigue until the last minute when the uncertainty in this case adds nothing and only subtracts. At stake is the key position to which companies, markets and investors (creditors) of the State’s trillion-dollar debt look and to which they will demand accountability from Brussels for economic and financial matters related to Spain.
For all of the above, the new head of Economy cannot be a stranger, but rather someone with specific weight when it comes to convincing investors, deploying growth policies that allow compliance with fiscal rules and defending before public opinion the scissors that d It’s the Government. There are multiple forecasts in the same direction. Among them, Airef estimates that adjustments of around 40,000 million euros will be made between 2025-2028 to anchor the debt objective in the medium long term, that is, that the projections stop looking upward and go down.
Of the available solutions that Sánchez has after Calviño’s departure, the only thing that seems certain – and that is saying a lot with the changes in presidential opinions – is that it will be continuous. The Minister of Finance and Public Function, María Jesús Montero, would once again gain power and is listed these days as second vice president – now she is the fourth – thus maintaining the ‘economic’ label for the number two position in the Government. She seems the only profile capable of arguing for a fiscal adjustment, defending the benefits of the umpteenth new tax and neutralizing Yolanda Díaz. However, she does not seem to fit the profile required from the Economy, Commerce and Business portfolio that has just been created.
On paper, the candidate with the highest score is José Luis Escrivá. He has been in the Government for four years and has fit into Sánchez’s hard core made up of Ribera, Montero and Bolaños. If it were an opposition, he would have won the position. He has international experience in institutions such as the ECB, BIS or BBVA but also has a recent past (2014-2019) at the head of Airef, the agency created to supervise public accounts. It is a key issue in the new legislature. Escrivá has been left with part of Calviño’s powers (Digital Transformation) after his time at Social Security and Pensions, the ministry responsible for an item of 200,000 million euros annually in budgets, whose sustainability and definition is one of the great problems of head of the government.
However, Sánchez has the option of an external signing that brings fresh air to the government’s policies but always with a technical profile. There are three names in contention from the financial world that also appear in the candidate pools. David Vegara, current chief risk officer (CRO) of Banco Sabadell, was Secretary of State under Solbes and Zapatero, but has experience in European institutions during the 2008 financial crisis and has the qualities to take charge of a vital area. of the ministry. : the Public Treasury. The ability of the issuing arm of the State to deal with refinancing will be key in 2024. The same can be said of José Manuel Campa, president of the European Banking Authority with a mandate close to its expiration and former Secretary of State with Solbes, Salgado and Zapatero. . Ángel Ubide, Sánchez’s economic advisor in 2015 and 2016, appears again among the potential candidates. His profile as an economist in investment banking and hedge funds (Citadel, Goldman, DE Shaw, Tudor) in the US works in his favor, but inexperience in Brussels circles weigh against it.
The only common link for all candidates is that they will have the difficult mission of maintaining fiscal balance, maximizing growth and leading the transformation of the economy at a delicate time. It occurs at a point of tension in households, the self-employed and companies after the effort in tax contributions in recent years. It also coincides with a certain complacency in the public sector, which consumes resources, as you know, from everyone. They have been four difficult years if ever there were one, but for the private sector, without the safety net of the civil service, much more than for the public. The succession of blows has been endless. From the pandemic to the bottleneck of global supplies, passing through the effects of the war in Ukraine, the energy crisis, galloping inflation not seen in decades and the lightning cycle of unparalleled interest rate increases.
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