• 10-N. The PP accuses Pedro Sánchez of "buying" the vote for planning the release of regional financing in full pre-campaign
  • Economy.S&P raises Spain's score to 'A' with a stable outlook despite political uncertainty

The political blockade endorses a growing bill for the economy. The legal inability of the Government to make certain decisions, the absence of Budgets that update economic policy and the postponement of structural reforms that enable the country to resist the commercial war, Brexit or a slowdown in neighboring economies, have already had a cumulative cost of between two tenths of GDP and up to 200,000 jobs, according to estimates of study services such as BBVA Research or the College of Economists .

In the economic analysis, risk identification is what shapes an investment opportunity. And in Spain, a country that after the financial catastrophe of 2008 offers great interest to investors of all kinds, the evolution of the policy has marked that profile. The end of bipartisanship in 2015 and the need for pacts to govern have brought together the word uncertainty in all macroeconomic and financial reports about Spain that periodically send investment banks to their clients.

Last Friday, the S&P agency improved its note on Spain while emphasizing the "resilience" of its economy and political "stagnation." That of 2015-2019 has been the most unstable period in the history of democracy and it has also been a phase of intense recovery after the great financial crisis of 2008. The secessionist challenge also made the use of uncertainty even more recurring, concentrating especially in Catalonia until the outbreak in 2017 of 1-O and the escape of headquarters in Barcelona . The truth is that the economy, in the process of recovery, seemed not to notice it with annual growth rates of 3%.

The term continued to be used already in 2018, when the weakness of the Mariano Rajoy Executive allowed Pedro Sánchez to carry out the first motion of successful censorship of democracy and gain the government backed by only 84 deputies and a borrowed budget. The GDP marked that year and at lower rates to end at 2.5%. With the most precarious parliamentary equilibrium and sound failures in obtaining support for proposals such as the ceiling of expenditure, uncertainty was drifting towards instability.

The accounts are not updated: for the second time the PP Budget will be extended

Blocking has already arrived in 2019. Exhausted the recourse of the decrees that opened on December 28 to raise pensions and salaries of officials and rejected the Budgets two months later, the policy offered no further route when the economic slowdown intensified. In the last year, the labor market has reduced its recovery rate until last August presented the worst affiliation figure since 2008. Last Monday, the National Institute of Statistics (INE) announced a reformulation of its indicators, indicating what values aggregates that have been considered recovery engines such as household consumption work with less intensity than expected. Already at this point, the doubts of the Minister of Economy, Nadia Calviño, before the summer on whether the forecast of economic growth should be revised upwards have dissipated. If anything, we will have to do it down. In this scenario, Brexit, the biggest external challenge facing the Spanish economy this year, will take place on October 31, 10 days after the elections.

"In the face of international investment, it is ugly to be an ungovernable country," says Juan José Toribio , an IESE professor. This economist with experience in the Bank of Spain , the Ministry of Economy and the IMF does not doubt the costs of the paralysis that he has not yet calculated. But he values ​​positively that civil society has proven to have an inertia over the economy "superior to what we estimated", in reference to the economic recovery experienced in a period of political instability unknown until now.

"The weight of the Government has been irrelevant in matters such as foreign trade or monetary policy," he says. «Yes, the budget management has had consequences, which has paralyzed transfers and investments although, almost in a cynical way, it could be said that the latter has a positive side and it is better not to have a budget to have a bad one because the one that had been announced It was very negative, a mistake, ”he defends.

The failure to form a Government and the repetition of elections will impede the elaboration of some Budgets for 2020, so the 2018 accounts prepared by the former minister Cristóbal Montoro will have to be extended for the second time, a new milestone of this stage.

The great majority of the economists consulted consider that it is in the aspect of the lack of Budgets where more damage does the blockade to the economy. "They are not updated to face the changes," explains Raymond Torres , director of the International Short Term and Analysis of Funcas . This lack of updating affects investments in roads, railways, housing, all kinds of aid for the renewal of the car park, energy transitions or, as they claim from UGT, social spending on dependency, education or special employment plans.

Ángel de la Fuente , chief economist of Fedea, cites as an example the deliveries on account not received by the autonomous communities, which expect the release of 5,000 million to relieve their liquidity and not have to defer payments. He maintains that it is a short-term effect, but draws attention to a problem that moves from the Central Administration and that should be addressed through major reforms.

Thus, the bill that accumulates to pay in the long term grows due to the lack of agreements between the political parties. "What is most missed for this period of instability or uncertainty is that there are no long lights to realize that we must undertake the reforms that the country needs in matters such as pensions or education or regional financing," says Torres.

Two years of work in the Toledo Pact jumped through the air when calling 28-A

The case of pensions is the most graphic about what the blockade that some parties make over others can cost Spanish society. With more than nine million pensioners mobilized as an interest and pressure group in defense of decent pensions, no party in the Government or the opposition dares to play with their votes, despite the constant warnings of organizations such as the Bank of Spain , the AIReF , the IMF, the European Commission or the OECD on the need to reform the system.

If in this sense there was a light on the legislature, that was that of a unanimous agreement in Congress to lay the foundations for a reform of Social Security expenditures with a horizon of six years. Working outside the external noise, the parties present in the Toledo Pact finalized their agreement until in February the announcement of the electoral call arrived and unanimity jumped into the air.

Two and a half years of work were broken and blocked waiting for the new Congress to form a new commission of the Toledo Pact to reach an agreement that saves Social Security in the long term. In the short term, the results are known: this year it will have to pay part of the benefits on credit and will conclude with a deficit of 16,000 million euros despite the sharp rise in contributions. By that month, the pensioners had already received a revaluation of pensions from Pedro Sánchez in excess of 0.25% set by law in 2013. The PP had already decided to offer them 1.6%, but Sánchez raised it to 1 , 7% in a movement that now studies repeating in the face of the 10-N elections.

Four general elections: 700 million

Post expense . Calling elections calling the vote to almost 38 million Spaniards has a cost that amounts to 140 million euros, of which the largest item corresponds to the post office to process distance voting or communicate the composition of the polling stations.

Party grants . You have to add subsidies to the parties for your election campaign. In these elections, this item will be reduced between 30% and 50% compared to previous elections due to a 2016 legislative reform that reduced campaigns in case of repeated elections.

Less campaign The campaign will be eight days, before the usual 15. In total, the cost since 2015 amounts to 700 million.

Paralyzed organisms

In addition to paralyzing decision making, the political blockade is also leading to an increasingly extraordinary functioning of agencies that depend on the Government and Congress. The Economic and Social Council , the National Commission for Markets and Competition (CNMC), the Securities Market (CNMV), the Independent Authority for Fiscal Responsibility (AIReF) or, and next year, the Restructured Restructuring Fund Banking (FROB) have exhausted or are about to exhaust the legal cycles of permanence of their presidents and directors. All of them are very important agents in the regulation and supervision of financial markets, the daily activity of companies, the labor sector or the supervision of banks and fiscal policy.

According to the criteria of The Trust Project

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  • Pedro Sanchez
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