March 3, 2021

“We should not worry now about debt, but about growing again”

The economist Antón Costas (San Pedro de Matamá, Vigo, 1949), who chaired the influential Circle of Economics between 2013 and 2017 and now chairs his Foundation, is in these times of pandemic one of the economic ‘oracles’ of reference to try to know what economic and social panorama awaits Spain after the crisis of the covid-19.

He analyzes this crisis from the baggage that comes from having lived many others before, always bearing in mind its social impact and with the conviction that, if Spain spends on priority, and spends well, it insists, it will also overcome this economic shock.

Question.- Now that all of Spain is already at least in phase 1 and a date has also been announced for the return of foreign tourism, how would you rate the rate of de-escalation in Spain?

Answer.- The exit strategy, in stages, and the rhythms seem sensible and prudent to me. We cannot forget that we have behind us an inheritance of 30,000 deceased people and many more hospitalized. I think that all that effort cannot be jeopardized by a non-prudent haste of (economic) openness, knowing that from now on we have to combine all this with employment and the economy.

Q. – A few months ago, when the pandemic was just beginning to emerge, there was speculation of a recovery in V. Do you dare to shape the recovery?

A.- A sensible and honest economist, to this question, has to answer with a dependent. Making a forecast implies knowing what will happen with the evolution of the virus, although some time ago I already said that the most sensible thing is a recovery in the form of a square root. It will also be a very important element the behavior of consumers and that economic policy measures are adequate and effective to generate confidence in the medium term.

Q.- What do you think will happen to the ERTE?

R. – Now employment must be the yardstick of all policies and all labor relations. We have to preserve the employment that we have managed to maintain with the ERTE and that it is not now transferred to us in the form of layoffs, and we have to take advantage of the public commitment to employment that the ERTE have been to extend it in a kind of creation of a fund national for full employment.

And it also gives me the impression that the minimum vital income can be a good instrument to accompany this flexibility in the exit of the ERTE.

Q.- How long can the State support the Spanish economy if at the same time the revival is not strong?

A.- At this time, the Government must do three things: spend to maintain the ERTE; spend to prolong them and spend to invest in health, education and science. And spending well, which is what will save us in the medium term. You have no other short-term alternative. And if there is a re-emergence of the coronavirus in October, you will have to continue spending, because it is the only way to prevent the sky from falling on us.

Q.- And when do you think the debate on fiscal consolidation or the containment of spending should open?

R.- If things are going well, from 2022, although in 2021 the Government must set a roadmap towards a return to budget balance, but it cannot hurry, in the same way that it cannot hurry now to open the economy.

Unlike 2010, there is the conviction that the total return to financial equilibrium must be done gradually, because however you want to do it violently, not only do you create anger in the population, but you amputate the growth capacity of the economy.

Q.- But the debt will continue to grow …

R.- Today the important thing is not the magnitude of the debt we have, which will be equivalent to 115% of GDP, it is inevitable, but the debt service burden, and it is less than when Spain had a debt of 70 or 80%, because interest rates are practically at zero. We should not worry today, in 2020 and 2021, about the magnitude of the debt, but about returning to growth.

Q.- How do you think Spain will be in a year, both economically and socially?

R.- If we do not have the misfortune of a spike (of the pandemic), I believe that we have a scenario that is not to start dancing with joy, but it is manageable both in social terms, as well as in economic and business terms. financial.

Q.- So we are not so bad?

R.- In worse places we have bullied than now. In the seventies, with the industrial restructuring, we Spaniards had the feeling that heaven was coming down on us. All the naval fell apart, also Sagunto, the Catalan textile and metallurgy …

We now have more capabilities and resources. We are the only western economy that in the last 15 years has had a permanent current account surplus, which is not just tourism, and we did not have that in the seventies and eighties. We are a competitive economy, more than we think.

Q.- How will Spain come out of the crisis?

R.- Economically, we are going to go out with a tail wind, with cheaper oil, and I would like to think that we are going to go out with greater cohesion, with a work and business climate more aware that we have to go out together and build a new social contract, where the company looks beyond profitability.

Q.- What changes accelerated by this crisis can be consolidated?

A.- Digitization is going to benefit a lot, because it operates in favor of bringing the jobs where people live and provides an answer to what we have called empty Spain. And the orientation towards the green economy also generates employment where people live.

Q.- Can precarious practices also be consolidated?

A.- I hope not, because now we are very aware that we live a little better thanks to essential workers who now already know who they are. Their working conditions and wages will have to be improved. Treat them as in the last century to the miners, who had a bonus because their work had an extra risk. They will have to be compensated.

Q.- I see then that you are a staunch optimist in the face of the crisis …

A.- I have reason to see with some hope that 2022 and 2021 are better than 2019 was. I hope I am not a silly optimist. An optimism of the will is worth it.

The new normal does not have to be worse than the previous one, but it will be necessary to do things well and with a lot of effort.

Javier Díaz


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