January 22, 2021

The credible and necessary narrative for 2021



Narratives in finance and business can be true or false, benign or harmful, but they are rarely innocuous. It occurs with business plans, which expressed by numbers are intended as a narrative. These plans are prepared over a five-year period, based on the expectation of income and expenses generated. The exercise of preparing the plan, with different scenarios and their probabilities, forces the author to translate a vision into words and numbers in order to tell a coherent and credible story.

Whoever is not capable, will not deserve, nor will he receive, market support. Now, the scenarios used to prepare these plans serve to organize ideas about the future, but not to predict it. The Spanish narrative for this year revolves around several key ideas in politics, economics and society.


The risk of inefficient use of European funds corresponding to Spain, and which account for more than 14% of GDP for a year, as long as the response to the pandemic is not unified since the beginning of the vaccination programs. It should be remembered that the forecasts for a fall in GDP for this year are 11% and the aid is granted between 2021-2023.

It should not prosper and should be prevented from the Government itself, the debate, and consequent narrative, that part of the cabinet wants to open on the Crown. The Constitution is very precise in this regard. It establishes that the person of the King is inviolable and is not subject to responsibility, so that his acts will always be endorsed by the President of the Government and, where appropriate, by the competent Ministers or by the President of Congress, it is they who have to endorse responsibility for the act.

For its part, the Constitutional Court has issued several judgments in which it establishes that any form of endorsement that is different from that established in article 64 of the Spanish Constitution, or that is not based on it, will be considered unconstitutional . So, the alleged political debate on the role of the Crown is void of content and the ideology with which it is approached is also meaningless.


The narrative that this crisis will cause many companies to disappear is a no-brainer, given the expected drop in GDP, but also an apriorism. The companies will be viable if the activity is normalized and there are no administrative closures of the activity. Competition under balanced conditions will do the rest.

If the economic authorities, regulators and the government encourage business “triage”, unemployment will rise to uncontrolled figures. The vaccine looks like the balsam of beasts, it will improve the situation, but companies need incentives to hire and the governments, the Spanish and the entire euro zone, are obliged to rebalance a situation that is becoming increasingly complex.

In fact, with negative interest rates, households pay 2.5 percent in interest on their liabilities and receive 0.6 percent for their assets, so that the ECB forces all savers to become investors Whether you want to take risks or not.

However, with negative interest rates, and expected to remain at these levels for a decade, a forecast that regulators have already dubbed “Lower-for-Longer World”, euro zone governments have benefited due to a reduction in their annual bill in interest for their liabilities of 195,000 million since 2008. In the case of companies, that bill has dropped by more than 100,000 million since 2008. Contrary to what the manuals say, the underlying message is tremendous: better to borrow than to save.


Three generations are affected: the young, by the precarious work and few opportunities to launch your professional career. Starting a career after a recession can lead to lower earnings for 10 to 15 years after graduation, this happened in Spain in the 1980s, it should be remembered. The very young, between 40 and 50 years old, face the risk of very short professional careers, which do not allow the creation of assets for when they leave the labor market.

The less young, early and retired, find a very low return on savings, to which is added the voracity of the Treasury and the concern generated by the proposals of the Minister of Social Security on pensions. With this outlook, there is little they can help other generations, a resource that has contributed to social cohesion and has supported the intergenerational pact in Spain.

For many professionals, working from home has just gotten easier. However, for workers in hospitality and tourism, retail, and basic care, the risks are obvious: job loss, a widening skills gap, growing inequality and a cost in mental health. So there is homework for 2021. See if positive thinking helps.

Carlos Balado is CEO of Eurocofin

Carlos BaladoCarlos Balado

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