After a certain hour, as those who love nightlife know, there is no longer an open bar and the bar begins to charge and require its customers to behave.
Luis de Guindos, vice president of the ECB, recalled this Thursday that the institute will soon stop buying the public debt of the eurozone countries as if there were no tomorrow. A policy change already announced, but which now takes on special relevance. In particular for the situation that Spain is experiencing.
Because the vice president of the European Central Bank once again announced to a large audience that starting in September, states will have to present their fiscal adjustment plans for the next four years.
But in the Spanish case, there are several problems. The first is that its notable economic results in the last period, especially post-pandemic, as the former Minister of Economy recalled, are also based on strong growth in public consumption. That is, a demand sustained by the State.
But he will not be able to feed himself as he has until now. Because the deficit will have to return to the path of 3% of GDP and the public debt, greater than 110% of GDP, will have to embark on a downward path. For this adjustment to take place, in the words of De Guindos, “financial stability that allows countries to make decisions” is needed.
And here the news enters the scene, furious. How are important decisions going to be implemented when the Government cannot even approve the budgets this year in the face of the political chaos caused by the elections in Catalonia? “This fact is bad for the stability of the country as a whole,” the president of the Cercle d'Economia, Jaume Guardiola, quickly admitted.
It is true that, for the moment, the market is not discounting uncertainty in Spain. The risk premium is at low levels. However, Guindos indicated that this cannot be the case forever nor is there any guarantee that it will not increase again if conditions change.
And the conditions can change, in a context in which, in addition to an Executive that runs the risk of not having the political strength to tighten the spending belt - we are not going to use the word austerity, but it is somewhat similar -, The country also needs a Government that has the drive to carry out an ambitious investment plan that not only Spain needs, but all of Europe: climate change, defense and digitalization. And to this we must add that the propelling effect of European funds is destined to run out.
More global risks? One that draws special attention is the stock market valuations, which Guindos acknowledged are “high.” European stock markets are at historic highs. When the so-called “irrational exuberance” broke out at the beginning of the century, Alan Greenspan in the US raised rates.
But yesterday, in front of an auditorium with businessmen such as the president of Foment, Josep Sánchez Llibre or the CEO of Criteria Caixa, Ángel Simón, they only talked about when the ECB is going to lower. In June or before. It is true that the ECB's mandate is to fight inflation and neither growth nor the markets.
However, as former Fed Chairman Ben Bernanke once said, “I care about Wall Street for one reason and one reason only: because what happens to Wall Street matters to Main Street.” And on the street, when the bar closes, you only think about how much fun you had while the party was going on.
