German Chancellor Olaf Sholz reminded Pedro Sánchez on Monday that the fiscal rules are there to be followed. The Germanic reasoning is simple: if Spain can now dispose of 140,000 million European funds to transform its economy, it is because savings were produced before. Sanchez fell silent. The alliance that he wants to forge with Germany to counteract the one created by Emmanuel Macron and Mario Draghi is up in the air. Scholz has many commitments to attend to before Sanchez.
A few days before traveling to Madrid, the chancellor had breakfast with the declarations of the new president of the Busdesbank, Joachim Nagel, warning that there is a risk that inflation will remain high for longer than expected and a response from the European Central Bank (ECB) will be necessary. An opinion endorsed by his finance minister, the liberal Christian Lindner.
German retirees haven’t gotten a return on their savings for years, and now that inflation hits 5 percent they do not want to lose more purchasing power.
Even the president of the ECB, Christine Lagarde, begins to give her arm to twist. In the welcoming ceremony for Nagel, he recalled that “the ECB’s commitment to price stability is unwavering“. The minutes of the last council of the ECB also recognize verbatim that “a scenario of high inflation cannot be ruled out for a long time”.
Lagarde, known by the nickname of Madame Inflation in Germany, tosure that it will not follow in the footsteps of the Federal Reserve, which is preparing to raise interest rates this March, although it will probably have to accelerate the stimulus withdrawal plan if prices do not correct.
The tensions that have arisen between NATO and Russia over Ukraine have a clear consequence: the increase in the cost of gas in Europe, which will subsequently be transferred to consumer prices. 40 percent of European gas comes from Russia. Putin has cut supplies to Germany, which is turning to coal production to save the day, as little as possible.
If Putin closes the tap more, the specter of a blackout in Central Europe, which has been haunting the minds of energy analysts for some time, would become a reality. The nearby Republic of Moldova declared a state of emergency over Gazprom’s failure to deliver gas.
Under what circumstances could such an extreme be reached? Of course, in the event of an invasion of the Ukraine. What possibilities are there?
Experts rule out a complete invasion, but they do see an incursion into the Donbass region as likely, an area rich in all kinds of minerals, which intends to declare itself independent and which is in the crosshairs of the Russian president to annex it, as has already happened with Crimea.
How would NATO react, given that Ukraine is not one of its partners? That is the great unknown. The Franco-German axis is divided. Sholz keeps a thick silence while Macron is in favor of the path of dialogue. Tensions soared on Thursday, after President Joe Biden hardened his position and went on to defend that lA single Russian soldier’s incursion into Ukraine would be considered a “casus belli” by NATO. Although on Friday decided to go ahead with negotiations.
The escalation of tensions as well as the uncertainties and their impact on prices will continue for the duration of the conflict. The cost of gas has already quadrupled last year, while oil is up more than 10 percent this year and threatens to hit $100 a barrel. Russia is our second largest supplier of crude oil.
Spain is one of the countries that has the most to lose in the event that the rise in inflation accelerates the withdrawal of stimuli or if interest rates rise because its debt reaches 120 percent of GDP and it is mostly in the hands of international investors, who would run away from a sudden change in market confidence.
That’s why no one explains explicit support for a NATO intervention that in recent days both the Foreign Minister, José Manuel Albares, and the Minister of Defense, Margarita Robles, gave.
in moncloa downplay the issue and defend a splendid future based on the new economic paradigm, consisting of using public funds to sustain or even accelerate the growth of the economy, as has been done in the pandemic.
They do not want to return to the deficit targets of the past and they propose that public investments for sustainable purposes do not count towards the deficit or open their hand to allow subsidies to companies, as Europe has done with chips.
With seven of the 17 members of the EU governed by social democratic governments, Sánchez has a golden opportunity to carry out his goals. But is Spain a reliable partner for others? yesSánchez was the second European president with whom Sholz officially met after his appointment. But the Moncloa mini-summit ended with a face of few friends.
With the end of the pandemic, the Government will have to settle the accounts. The only way is to increase the fiscal pressure. The Minister of Finance, María Jesús Montero, will soon convene her commission of experts to hear the verdict on the tax reform, although they can already imagine it.
Meanwhile, the Minister of Social Security, José Luis Escrivá, has presented the plan for the self-employed to contribute based on their income. Escrivá assures that two out of three will pay less taxes, but the truth is that not only does the minimum contribution rise, from the ATA employers’ association the average increase is estimated at 40 percent.
Government has to overcome another challenge to gain the trust of its European partners: efficiency in fund management. It’s complicated. The PP, aware of the importance of these resources for the Executive, wants to open a battle to denounce its inefficiencies, which are many.
Pablo Casado assures that of the 24,000 million received by Spain last year, only one hundred million reached its recipients. The CEOE increases this figure to one billion. Calviño assures that two thirds are already committed. But how many reached their final hallmark? The Government admits that practically none, because 46 percent were delivered to the autonomies, which have not yet distributed them.
In the case of the central administration, the ministries have the money withheld pending the approval of Moncloa. The paralysis is monumental. To make matters worse, the Government refuses to create a commission or to share the distribution criteria with the autonomous governments and with the opposition, which gives them the opportunity to accuse him of making the distribution by hand or with political criteria.
The first two politicians to denounce the distribution of these resources were Isabel Díaz Ayuso and Alberto Núñez Feijoo. But others will follow, which may lead Europe’s frugal partners to call for more aid oversight or even the paralysis of some of the programs.
With a tight electoral calendar ahead (elections in Castilla y León and Andalusia), it is difficult for the Government to reach new agreements with the opposition or with the employers. The labor and pension reform, the two key initiatives required to approve the second tranche of aid for more than 20,000 million, will be implemented without the support of Garamendi’s employers.
Sánchez enters a minefield, with many open fronts: withdrawal of stimuli, rise in interest rates or possible Russian economic sanctions, which would make us a victim of the conflict as happened after the invasion of Crimea, so the verbal ardor of his ministers in defending him is not understood.
PS.-The unions at the Ford plant in Almussafes have until next Thursday to reach an agreement with the company’s management, which revolves around two points, salary cuts and greater labor flexibility. They are the only tricks that count in the Valencian factory for prevent the production of the new electric range from being made in Germany instead of in our country.
Where is the Vice President and Minister of Labor, Yolanda Díaz, who has not raised his voice against wage devaluation, that he criticizes so much of the Rajoy period. This time he looked the other way. The problem is that itIn own car brands or otherwise, the only way to retain the investment is with low and flexible costs.
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