Main hall of the headquarters of the Bank of Spain in Madrid.
Julio García, Madrid
The economic crisis that has affected Spain since 2008 seems to have reached its end to start a recovery phase that began last summer. The governor of the Bank of Spain, Luis M. Linde, assures in the presentation of the annual report of 2013 that the Spanish economy is immersed in a recovery phase, which started last summer and has put an end to a long and deep recession.
The report highlights the progressive economic dynamism of 2013, which materialized in positive growth figures from the third quarter. In 2014, data also point out to the strengthening of this trajectory. Linde assures that the change has also been shown in the labour market, where the long stage of employment destruction led to a modest net creation of jobs at the end of 2013, which remains at the beginning of 2014. In any case, he adds, the unemployment rate closed last year “at an unacceptable high level”.
This economic growth comes both from external and internal factors. The increase of exports and the creation of the European bank union, which has contributed to reduce the financial tension of the area’s markets, stand out among the first factors. Concerning the internal factors, the implementation of the reform’s programme has improved competitiveness and the restructuring of the banking system. On the other hand, in the field of public accounts, the deficit was reduced in 2013 until 6.6% of the GDP. The matter pending is the high level of public debt in relation to the GDP.
Linde explains that despite the progress being made in the restructuring of the Spanish economy, the consolidation of the recovery is facing great challenges as a result of the deep effects of the crisis. Therefore, the economic policy will have to encourage improvements regarding competitiveness and the reallocation of resources for sectors with greater growth potential while the public and private sectors get out of indebtedness.
Linde asks for the consolidation of the way to get the public sector out of the indebtedness
The governor of the Bank of Spain states in the aforementioned report that after the boost of the monetary policy on the European level, the challenge is to encourage its transmission to the Spanish companies and families. Besides, the performance on the fiscal area has to be consolidated by getting the public sector out of indebtedness. In his opinion, these are two key pieces to maintain the trust of investors and to guarantee the external financing of the economy.
On the other hand, he suggests the Government to repair, in the reform of the tax system that it will soon present, the problems affecting taxation in this country: reduced tax revenue generation and inclination towards direct taxation and social contributions, resulting more damaging for competitiveness and employment.
The report explains that the greater flexibility of the labour market and the wage moderation are favouring the creation of employment and that a cyclic sensitivity of prices is leading to a correction of the competitiveness difference created during the last expansion cycle.
There is also a noticeable change in the role played by the inflation based in the process determining the costs and income. Linde indicates that this is an important change for the adaptation of the membership requirements in the Economic and Monetary Union (EMU) and that it will be strengthened by the application of the Law on Deindexation of the Economy.
He also considers that it is important for the reforms on the product markets (Law on Entrepreneurs, Law on Guarantee of the Single Market and the reforms of the Bankruptcy Law, among others), designed to increase competence and to improve efficiency, to be implemented quickly and with ambition.
The governor of the Bank of Spain concludes that perseverance in the approach of the economic policy will allow setting a recovery path more and more firm, which constitutes the heaviest legacy of the crisis and the main economic and social problem of our country.