Sunday, June 26

The Bank of Spain asks Congress for “broad consensus” to promote reforms

The Governor of the Bank of Spain, Pablo Hernández de Cos.

The Governor of the Bank of Spain, Pablo Hernández de Cos.

The Bank of Spain has demanded this Wednesday in Congress “broad, political and social consensus”, with a “vocation of permanence” and that “be credible” when designing and implementing the structural reforms that, in its opinion, requires the Spanish economy.

These structural challenges, has synthesized the governor in his appearance before the Commission for Economic Affairs and Digital Transformation, go through “two historical shortcomings of the Spanish economy”, “low productivity and the malfunctioning of the labor market” and three challenges: the increase in inequality, climate change and the aging of the population.

“I believe that much of the growth and our prosperity depends on us facing the challenges in a consensual, urgent and ambitious way “, said Hernández de Cos, who has gone to the Lower House to present the ‘Annual Report 2020’ of the Bank of Spain.

De Cos has stressed the need for raise productivity, attending to deficiencies in terms of competition and market unity obstacles, but also to “important deficiencies in educational level” and investment in innovation, for which it has asked to enhance the role of venture capital.

In labor matters, he has opted to address the duality in the labor market – he has insisted on the reform of the dismissal system and the implementation of an Austrian backpack model, taking advantage of European funds – and has regretted how, having identified this problem since several decades ago, it was not done “nothing really substantial.” For this reason, he has stated that using the funds to alleviate transition costs of 9,000 million is “a unique opportunity to make those changes.”

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Other proposals by the governor have been aimed at increasing the scope of minimum income programs, by detecting that “groups at risk of extreme poverty are not covered” by the minimum vital income (IMV), increasing the rental offer and effective policies to “mitigate” the depopulation of rural areas and adapt to these changes.

With regard to the public pension system, he has advocated “reinforcing” the equivalence between contributions made via contributions and the benefits themselves, increasing transparency and “predictibilidad”, as well as “incorporating considerations of intergenerational equity”, with “automatic mechanisms” to “adapt the parameters to the economic and demographic realities”.

The use of European funds and a consolidation plan

Hernández de Cos has also pointed out the importance of use that the European funds of the Recovery Plan and the “degree of flexibility” of the Spanish economy be finally given, since greater flexibility favors a greater multiplier of these resources.

Of the 6% GDP growth forecast for 2022, approximately one point is derived from the use of the funds, but in 5.3% the European funds represent two points, and it has asked to use the resources that come to projects and reforms with greater capacity to increase growth potential growth.

Likewise, he has insisted on the need to anticipate the design, not the execution, which he has asked to delay until a recovery of the economy, of a consolidation plan that goes through a comprehensive review of all items of expenditure and the tax system.

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