Highlighting the resistance of the Spanish economy and defending optimism have been the main objectives of the appearance this Wednesday of Vice President Nadia Calviño in the Congress of Deputies, in an irremediably hostile international context. And she has done it strategically one day before the European Central Bank (ECB) decides to raise, up to 0.75%for the second time official interest rates in the eurozone, after the increase of 0.5% in July, to end a long decade with rates at 0%.
Spain quadrupled the growth of the OECD as a whole in the second quarter, before the drums of recession
An increase in the cost of financing through which the institution intends to cool down the economy and reduce inflation, with the assumed risk of causing a recession if the blow to family consumption and investment by companies and the State, already damaged by the rises in prices, it is too strong.
“Spain remains in a growth path despite the energy crisis, the tightening of monetary policy and the uncertainty due to the Russian invasion of Ukraine”, argued Nadia Calviño, First Vice President and Minister of Economic Affairs, who stressed the burden of public debt [lo que el Estado gasta cada en año en la factura de intereses] continues to decline even if interest rates rise.
This financial burden or interest bill on public debt remains close to 2% of GDP, far from 3.5% in 2013, and is around 5% of public revenue, well below the 9% it exceeded in those years of the euro crisis, just after the bank bailout.
Calviño insists that Spain presents clear differences with respect to other economic cycles, compared to other crises. And one of these differences is precisely the "sustainability of public finances", in the sense that paying the debt requires less effort on this occasion, after years of expansionary monetary policies that the Public Treasury has taken advantage of.
This "sustainability" is also reflected in the objective of reducing public debt below 110% of GDP, after soaring in 2020 above 120% due to "the cost of the response to the pandemic", and the measures that the energy and inflation crisis are demanding. Calviño has also clung to the objective of reducing the budget imbalance, the deficit (what is spent compared to what is received), from 5% in 2022 and 3.9% in 2023.
We have achieved a 55% reduction in wholesale market prices, which gives us an important safety net. pic.twitter.com/PsVXoFV3BT
— Economic Affairs and Digital Transformation (@_minecogob) September 7, 2022
Along the same lines, the vice president has argued that the risk premium [el diferencial entre el interés que se exige a la deuda de referencia de España y el de la de Alemania, considerada la más fiable] remains slightly above 100 basis points, close to the average for the period between 2015 and 2017, which demonstrates the ECB's willingness not to allow the most over-indebted economies in the eurozone, such as our country or Italy , end up drowning in the fight against inflation.
Less unemployment and Recovery Plan
Another differential factor for Spain is lower unemployment. “There is more quantity and more quality of employment”, she recalled. And she has pointed out "the transfer of temporary to permanent employment due to the labor reform."
The third key to underpin optimism is the Recovery Plan, financed by European Next Generation funds from the EU. “A historical transforming process”, he added, as well as the measures to respond to inflation. As she has presented, Spain's allocation of funds to protect homes and businesses from rising energy costs exceeds 2% of GDP, above most European economies.
On these keys, Eurostat raised this Wednesday the economic growth of the eurozone to 0.8% in the second quarter, from the previous 0.6%, and confirmed that Spain stood out in the region as a whole with an increase in activity of 1.1% between April and June, compared to the first quarter. Figures that Calviño has also grabbed this Wednesday in the Economic Commission of Congress.
This better behavior of the GDP (Gross Domestic Product) of our country responds to the strong rebound in household consumption and the most intense moment of the rebound of the economy in general, after receiving a greater blow in the COVID shock and despite the slowdown of the energy and inflation crisis and the uncertainty due to the Russian invasion of Ukraine.
At the end of June, the activity in Spain is the one that is farthest from the level of the fourth quarter of 2019, before the pandemic, within the EU (still at 2.5%), while Germany, France or Italy they have already overcome it, according to the European statistics itself.
This delay in economic reconstruction has been used by almost all groups in Congress as a reply to Calviño's presentation. If the comparison is made from the second quarter of 2019 to the second quarter of 2022, the GDP gap in our country is reduced to 1.7%.
On the other hand, at the moment, Spain leads the growth estimates for the end of 2022 and 2023, and it could be the only major eurozone economy to escape recessionwhich threatens Germany.