“A fair distribution of losses”. This is what the Annual Report that the Bank of Spain has just presented this Wednesday raises. The body chaired by Pablo Hernández de Cos warns of the strong impact that the current escalation in prices could have on the Spanish economy if it is transferred to the effects of second or third rounds.
For this reason, it suggests that the social agents advance in a negotiation focused on guaranteeing an income pact that stops these secondary effects and that has, at least, effect for at least two years and that guarantees the participation of all.
Ángel Gavilán, General Director of Economy and Statistics of the Bank, has recognized that the easy part of the pact is to charge the impact on the containment of salaries, but has insisted that "it is also necessary to enable mechanisms that guarantee that there is a moderation of the business benefits”.
The governor himself has gone further, who in an interview published on the entity's website asks that the income pact go beyond the negotiation between social agents and involve everyone. “What we suggest is that the reference for the increase in wages be subjacent inflation and that the rest of the income, public wages and pensions accept part of the loss, we are in a position to avoid the inflationary spiral and contribute to the inflationary episode that we are living is shorter and the negative repercussions are clearly less”, assures Hernández de Cos.
The Bank of Spain defends that the indicator that should govern these updates is underlying inflation, which excludes energy and fresh food due to its volatility, and which in April rose to 4.4%, compared to 8, 3% that marked the general CPI. Although the data that would be used to update salaries would be the annual average of that underlying inflation, closer to 2%.
“It would also be desirable to avoid safeguard clauses that ensure revaluations in subsequent years because it could generate situations as inconsistent as wages being updated next year at percentages much higher than those of inflation at that time, which would mean a generalized increase in wages. costs that would slow down exports”, warned Gavilán.
Regarding the impact that this measure could have on pensions, the governor has already stated on previous occasions that the position of the Bank of Spain is that the update of the CPI is not generalized, as approved by the Government, but only the lowest .
With its sights set on the long term, the Bank of Spain has once again recalled that with the current design, the sustainability of pensions is in question. "We have been pointing out in recent years the convenience of reinforcing the link between the contributions made and the benefits received -ensuring a sufficient level for the most vulnerable households-, as well as initiating a rigorous debate that addresses the level of benefits that the system must provide and the strategy for attracting the necessary income to finance them”, the report points out.
The body calls for greater transparency and predictability "in order to offer certainty to citizens and facilitate decision-making in the areas of savings, work and retirement" and points to the advisability of introducing "automatic adjustment mechanisms that adapt some parameters of the system to the changes that occur in the demographic and economic dynamics”. That is, return to the spirit of the reform of the PP with measures such as the sustainability factor.
In general, that of solving the pension front is the same spirit that underlies the almost 300 pages of the agency's annual report on 2021, since the main conclusion is that both the damage caused by the pandemic and the effects of the impact of the war in Ukraine are very heterogeneous and affect families and sectors very unequally.
"We put a lot of emphasis on making the economic policy very surgical," he highlights. "The poorest families have been most affected by the rise in energy and food prices. It makes sense for economic policy to try to help these most vulnerable families more, even within the context of the income pact,” says Hernández de Cos.
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