The 'total amendment' of the Bank of Spain to the Budgets: it does not see credible income, expenses or forecasts

The governor of the Bank of Spain,

, makes an amendment to the entire State Budget project with technical arguments.

The senior official who is in charge of the considered best study service in the country shares that public investment must be increased in the face of the pandemic, but neither the income nor expenditure forecasts raised by the Executive of Pedro Sánchez nor the macroeconomic picture on which it is based.

Nor do you see

All star measures such as the rise to civil servants and pensioners and the tax increases.

That is, everything that supports the bill of public accounts.

In an appearance that lasted more than three hours, De Cos used a silk glove and official language, but crushed the government approach on all fronts.

1) Don't create the macroeconomic picture

Hernández de Cos presented as unrealistic the forecasts of economic growth of the Vice President of the Government,

Nadia calviño

, from about 10% in 2021 thanks to European funds.

«The assumption of full implementation of European funds and the multipliers of the use of these funds that

assumed by the General State Budget Project (PGE) seem optimistic in light of the historical and empirical evidence

.

In relation to the capacity of our economy to mobilize funds linked to other European programs, in the last three European structural fund programs (of a lower amount than the one foreseen in the new Next Generation program), after 7 years of validity of the The same, the Spanish economy's absorption rate of available resources never reached 80% ».

In addition, he doubted that the funds will be used in projects with a multiplier effect of growth. He was also tough with the optimistic employment forecast.

«While the macroeconomic picture of the PGE Project

expects a drop of 0.8% in this rate, to 16.3%, the scenarios of the Bank of Spain foresee increases of between 2.3% in scenario 1

[the most optimistic about the pandemic] and 3.5% in scenario 2 ».

Additionally, De Cos presented the recent growth in the third quarter as a mirage.

"A wide battery of indicators would suggest that, throughout the fourth quarter, the intensity of this recovery would have been losing momentum, evolution mainly related to the rapid increase in the number of infections in recent months."

And, against the optimism of the Minister of Social Security,

Jose Luis Escrivá

De Cos sees "stagnation" in the membership data for October, because "unlike what happened in the preceding months, the year-on-year rate of change in membership did not decrease and remained at -2.3%."

Therefore, it sees Spain towards the worst scenario of the Bank of Spain that foresees an economic collapse in 2020 of 12.6%.

2) Do not believe the expenses

The economist emphasizes that the increases in public spending of 70% in infrastructure, education or health, "may not materialize in its entirety", "due to" possible delays in its effective processing.

Instead, he sees spending on crucial chapters against the pandemic undervalued.

“Spending on purchases of goods and services, a heading that includes the acquisition of sanitary material, is expected to decline by 2.5% in 2021 after registering an increase of 14% in 2020 (predictably).

In the same vein, it is also expected that unemployment spending - an item that, among other factors, in 2020 has been greatly affected by the activation of the ERTE - will fall by 36% next year ».

Faced with the continuation of the pandemic, go

«Risks, therefore, of upward deviation in these items,

difficult to quantify. '

3) THE INCOME IS NOT CREATED

The Budget Project assumes that tax and social security income will grow 9% in 2021, «but

there are three main factors that determine the feasibility of this forecast

: the collection capacity of the new tax figures [Google or Tobin], the sensitivity of the collection to the tax bases and, above all, the possible deviations from the GDP growth forecast ».

4) DOES NOT APPROVE INCREASES TO OFFICIALS AND TAXES

The governor of the Bank of Spain is against raising the salaries of employees in a generalized way, as the Government finally proposes.

It does so for two reasons: on the one hand, raising 0.9% would make officials gain purchasing power, since it foresees lower inflation, “at a time when, at the same time, significant destruction of income is taking place. employment in the economy as a whole and a very marked deterioration, without recent historical precedents, in public accounts.

On the other, it is an increase in public spending at a time of lack of resources to face the pandemic.

Consequently, he proposes - «we are still on time» - that «it would be more convenient that, instead of adopting generalized salary increases for public workers, the possibility of implementing, according to objective criteria, to

more focused groups within this group, for example, in health personnel

"He was also critical of the government's approach to raising taxes already in 2021." The ongoing economic recovery still shows obvious signs of fragility and is subject to considerable downside risks that do not advise a general increase in the tax burden in these moments.

For this reason, it would possibly have been preferable to delay the introduction of any of them until our economic recovery was more robust. ”Regarding pensions, he also questioned the revaluation of 0.9% for 2021 and pointed out that if it is also perpetuated over time, it will have to be compensated by other measures to avoid a growth of the structural deficit close to 10 billion annually.

«

Facing these pressures of population aging will therefore require increasing system resources or admitting alternative reductions in the rate of benefit.

or additional increases in the effective retirement age. ”He insisted that since he sees a deviation from the government's deficit and debt objectives likely, adjustment measures will be inevitable throughout the decade, which is why he considers necessary a major political pact on the principle that the public accounts will have to be cleaned up.

“It is imperative to design, as soon as possible, a detailed medium-term budget consolidation plan to be executed as soon as the pandemic is overcome and that, by reducing the financial vulnerability of the economy, helps to place activity and employment in a path of sustained growth ”.

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