It is always interesting to listen to the Governor of the Bank of Spain, Pablo Hernández de Cos, because he usually says things by name, and yesterday there was a lot of interest, in his speech at Foros de Vanguardia, that he could give some clue as to where runs the Spanish economy. It is true that, as he himself privately admits, "economists sometimes do not see them coming", in relation to the inflation crisis that no one could predict, but even so he made an effort to clarify the future and point out what can be spend.
Hernández de Cos pointed out that the most plausible scenario is one in which there would be no recession as long as four hypotheses were given: that Western sanctions against Russia were maintained until 2024; that there were no problems with the supply of basic products; that there would be no restrictions on Russian gas to Europe, and that the war would not last much longer. With this panorama, and admitting "the extreme uncertainty" that reigns in the world today, the governor sent a prudent but optimistic message, which is not bad considering the dark clouds that hang over the future of the economy. Of course, he insisted again that in Spain there must be an income policy that prevents inflation from skyrocketing. In this sense, he called for containment of wages and for companies not to increase prices.
The governor did not want to disqualify the tax on banks that the Government has set, arguing that its magnitude is not yet known, but he made it clear that he could not agree with measures that could affect banking stability or the volume of credit. And he stressed: “It is not easy to establish a tax that does not end up affecting” the economy. And on the other measures that the Executive has put in place, such as reductions in fuel, he commented that he is more in favor of less general provisions and that they are aimed at the most vulnerable.
If there are no new disruptions in the coming months, the governor does not rule out that inflation can be contained. The downside risks that the ECB foresaw in June have already arrived. The key now is that new ones do not appear. In short, we are not so bad.
