The Vice President of the European Central Bank (ECB), Luis de Guindos, revealed yesterday on the COPE channel that the institution acquired some 120 billion euros in Spanish debt in 2020, which represents “practically all” of the net issue made by our country and the equivalent “to what Spain will receive from the EU fund in four years”.
De Guindos explained that, with its intervention, the ECB is seeking to bring inflation closer to the price stability objective and to ensure that financing conditions are appropriate, above all for governments, since “the only thing missing for the weakest economies is that, apart from the health and economic crisis, there would be a debt crisis similar to that of 2011 and 2012”.
In this way, the former Minister of Economy pointed out the importance of the country taking advantage of these conditions in which it is practically financing itself at zero cost.
“Responsible fiscal policy at this time means spending more to incur a public deficit,” De Guindos added in the interview, collected by Europa Press, warning that, in any case, this excess spending should be directed towards issues related to the pandemic such as European ERTE, health expenditure or coverage of loans with public guarantees.
“We must spend more, but we must spend correctly (…) We must not take advantage of the pandemic to increase other types of expenditure that are not related to the pandemic”, he stressed, anticipating that from 2022 and 2023 “budgetary adjustment processes” will have to be carried out in the countries with a more deteriorated position, since once the pandemic is over, the fiscal position of the countries will be looked at.
“The deficit we are having is for exceptional circumstances, not for normal circumstances because it is not sustainable in the medium term,” he warned.
In this sense, questioned about the rise in the MIS, De Guindos pointed out, in general terms, that the suitability of the measure depends on the specific circumstances, since in countries with full employment the rise is brought by the market, while in countries with high unemployment it is necessary to be much more careful.
The Vice-President of the ECB reiterated that the recovery will continue to be uneven and incomplete, plagued by uncertainties, to which must be added the vaccination process, which is expected to gain speed and allow “a significant pull on the European economy”, with a “relatively intense” recovery in the second quarter, after a slight growth or almost zero expansion is expected between January and March after a fall of around 2% in the euro area in the fourth quarter of 2020.
“Our projection for the euro area is a contraction of GDP in the fourth quarter of around 2% and a recovery in the first quarter,” said De Guindos, who recalled the Bank of Spain’s projections, which in its central scenario forecast a contraction of slightly less than 1% for the country between October and December 2020.
In the case of the Spanish economy, the Vice-President of the ECB expressed his confidence that there would be a greater recovery than the average for the Eurozone, after Spain had also suffered more intensely from the effects of the crisis as a result of its economic structure, in which tourism and catering weigh heavily, with many “very small” companies, in addition to the fact that “its fiscal position in 2019 was not the best”.
“From the second quarter I believe that there should be a relatively intense recovery (in the Eurozone) and this has to positively affect Spain, which has to grow more than the Eurozone average because we have also fallen more than the average”, anticipated De Guindos, who believes that, as community immunity is achieved and restrictions are lifted, it will be positive for the Spanish economy.
In this regard, the economist pointed out the risk of a long delay in vaccination, as well as other developments linked to the pandemic, such as new variants of the virus, as the main threats to the central scenario envisaged, which envisages the second half of 2021 being closer to normal.
“The downside risks are always linked to the evolution of the pandemic, although the central scenario is that the situation will improve significantly in the coming months,” he said, indicating that the euro area economy will recover to pre-covid levels “by the end of 2022” after two years of growth of around 4% “if everything goes according to plan”.