There is no analysis in the international press that does not address the uncertainty over economic forecasts to the point that it might be necessary to revise the calculations in the fall, not to mention the winter that is already directly embedded in the world of the unknown. The leader of the PP is clear about it and does not need more time to reach a conclusion. “We are no longer talking about symptoms, but about clear facts. We are heading, even more intensely, towards a very deep economic crisis”, Alberto Núñez Feijóo said this week. He has found a way to disregard employment data and any other metric that contradicts him.
Only 24 hours after these statements, the president of Airef appeared at an informative breakfast. “We don’t see a recession” this year, Cristina Herrero said. The latest growth forecast from the Bank of Spain is 4.1%, lower than the one that existed a few months ago. It is very possible that this figure is higher than the revisions made in the coming months before the end of the year. In any case, they rule out a “deep economic crisis”, as Feijóo said. Among all the possible ways of defining the word ‘crisis’, there are not many that are compatible with growth in GDP and employment.
Herrero’s analysis is not very optimistic nor does it serve to validate the Government’s thesis. He stressed that the revaluation of pensions linked to the CPI could increase their total bill by 9%, that is, some 13,000 million more.
In the end, it is going to turn out that what is going to condition all social spending in the next budgets will not be the increase in military spending – advanced now by those one billion extraordinary items for Defense that Pedro Sánchez has approved to please NATO or send a message to United We Can or both – but the increase in spending on pensions.
There will be people who do not like to hear this, but the numbers are what they are.
The Spanish government is facing a dilemma similar to that of Joe Biden in the US. The US president has said more than once that his priority at the moment is to deal with the consequences of inflation. Easier said than done. Any measure that serves to mitigate the impact of rising food and fuel prices can cause an increase in demand for these products once they become more affordable. That would increase inflationary pressures.
The Biden Administration has fewer mechanisms to deal with inflation than the country’s central bank. The problem is that the Federal Reserve is like a hammer that by raising interest rates ends up harming economic activity. The ideal mixture would be a combination of both, but nobody knows the perfect recipe.
Inflation is like the monster in a horror movie or aliens that it is not easy to find the right weapon to eliminate. You can even use nukes against him and have the dubious success of making him bigger and more dangerous.
Feijóo’s statements serve to receive a generous space in the right-wing press. That is not difficult. They also devoted many headlines to the announcement that Spain would not receive a euro from European funds until some reforms were approved that the Government was not willing to implement. Spain is now the country that has received the most funds. It has even received a supplementary amount of 7,000 million for having been more affected by the pandemic than others. How did ABC fix it? Titling that the extra money came from the “poor economic performance” of Spain. Not a day without lending a hand to Feijóo.
It so happens that one of the changes demanded by Brussels is a tax reform that increases the state’s tax revenue, which is lower as a percentage of GDP than that of most European economies. On that, the PP does not want to speak. What he intends is the opposite, a decrease in all taxes that will have the foreseeable consequences.
In any case, it is a bad time for that with the elections a year and a half away and the regional and municipal elections much sooner. Or so the PSOE thinks. So it has been decided that the subject will not be discussed until the next legislature.
In order for that “extremely deep” crisis that he announces or longs for to appear, the leader of the PP needs more impactful help. It can only come from Vladimir Putin, who is in a position not so much to send the European economies into recession, but rather to place them very close to that ravine. It is no longer hidden in public statements. If Russia completely cuts off gas supplies to Europe in winter, Germany and Italy will suffer a dramatic blow and the fall of the former could drag down half the continent.
We will know with more certainty when the maintenance tasks that will force the interruption of supply in the Nord Stream 1 gas pipeline are finished at the end of the month. If the tap is still closed afterwards, the gas reserves will probably run out by the end of winter. The emergency measures already planned must have been applied beforehand. In order to guarantee service to homes, gas delivery will be cut off to companies, which may be forced to stop production and approve layoffs. That in the best of cases, because in others there will only be the alternative of closure. According to German employers, that would lead the country into a brutal recession.
Perhaps the most rational option would be start an energy saving campaign right now. But that is not in the nature of European and EU governments, accustomed to fighting against crises only when they are upon them. It is a privilege that the rich have.
It was Scholz, Macron and Draghi’s trip to kyiv that prompted Moscow to decide to cut Russian gas supplies to several European countries, including Germany by 60% and Italy by 50%. From the outset, European countries said that sanctions on Moscow would make Putin pay a heavy price for invading Ukraine. In the short term, they too have had to suffer the consequences and have trouble explaining it to their respective public opinion.
The ominous prognosis that Feijóo aspires to take him to Moncloa has not yet been fulfilled. If he gets proper help from Moscow, then he will indeed be closer to the ultimate prize of the race.
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