April 11, 2021

John Müller: Debt and Debt


Madrid

Updated:

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Beyond the CGPJ, the Executive of Pedro Sánchez has a couple of issues to resolve in the short term of great economic and political importance. The most important is that of direct aid authorized by the Temporary Framework adopted by the EU on January 28. Nobody can explain how what should be an opportunity has become a source of contention, leading to an open clash between the bank and the government. Removals are in the European toolbox, but they are by no means the first choice.

It is likely that, having spent so much time in Brussels, Nadia Calviño is unaware that, along with the emergence of Podemos, the idea became general in Spain that when someone stops paying a loan it is not their responsibility, but the responsibility of the person who lent them. This clashes with the vision of the north. Let’s not forget that, in German, “debt” and “guilt” share the same word, “Schuld,” which adds a moral dimension to the matter. But here, putting the cuts on the same level as restructuring or moratoriums is not a technical assessment, but an invitation to a festival of moral hazard.

This week, the Government should offer more details about what it intends to do and enlighten us about that “additional package” of 11,000 million that Sánchez announced on Wednesday and that Calviño still did not know how to baptize the next day. Apparently, the president, annoyed because his government turns out badly in the photo of direct aid, has decided to throw his cap on the other side of the wall and force Calviño to jump over it.

It is very likely that, on the subject of ICO loans and banking, the solution that is proposed is fundamentally inspired by the Code of Good Practices for mortgage debtors that the Government of Mariano Rajoy developed from Royal Decree Law 6/2012 and to which other regulations were added in 2013 and 2017. There are a series of reasonable and staggered measures that would allow the dialogue with the banks to be redirected.

More unnerving for the government, and no less important, is the issue of rent prices. The problem is that Sánchez gave the green light to that part of the PSOE agreement with Podemos that his Government made possible and that develops various measures of intervention in the housing market in 12 points. The agreement is explicit: “We will stop abusive rent increases.”

What has not been highlighted enough is that there were several people, including Pedro Saura and Helena Beúnza, former Secretary General of Housing who left office in February 2020, who warned Sánchez that he could not give in on that point, because The effects of an intervention have been shown to be complex. In Berlin, which Podemos uses as an example, rents fell, but supply fell and people left for the surrounding area despite the fact that the public rental endowment is higher than in Spain. In this matter, the person in charge of jumping the wall is José Luis Ábalos. [email protected]

John MüllerJohn MüllerOpinion WriterJohn Müller

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