The economy continues to be a complex subject for Alberto Núñez Feijóo, the president of the PP and firm candidate for the presidency of the Government in the next general elections to be held at the end of this year. A new example of this occurred on the occasion of the meeting with the conservative prosecutors held on April 18. According to El País, a newspaper that published the content of what was said during the dinner that the opposition leader shared with the conservative prosecutors, the politician explained to the senior justice officials that “There is a huge economic crisis. We are in the last party but Europe is not going to put fiscal rules until 2024 and they are going to give five years for the adjustments ”.
This dramatic prophecy was based on the fact that “we have a debt of 110% of the Gross Domestic Product (GDP) [lo que la economía de un país produce en un año] and we have to go down to 60%. It scares me just thinking about it, ”said Feijóo. Conclusion, “I laugh at the 9% drop in salary for prosecutors”, in reference to the cut in salaries for civil servants applied in 2010 by the socialist government of José Luis Rodríguez Zapatero. Prosecutors corrected Feijóo, pointing out that the snip was 11%.
Perhaps it was because he was comfortable with an audience that looked at him sympathetically, but the truth is that the Galician politician’s words betrayed a strange distance with the exercise of government tasks that could be interpreted as a lack of conviction or little faith in his election victory. A psychological slip? The phrases reproduced by the Madrid newspaper reveal a Feijóo who seems to think that the harsh economic measures that would have to be applied would be the task of another, a third party. A Pedro Sánchez government after the elections? Otherwise, the frivolity of the omens from him is not understood.
The idea that the Spanish economy is on the verge of a major crisis in the immediate future is the recurring soundtrack in the PP and its spheres of influence. A prediction that is largely based on the increase in the cost of public debt as a result of the interest rate hikes applied by the European Central Bank (ECB). But what is true and what is alarm interested in the prognosis? To what extent does Feijóo resort to the classic noisemaker that his rivals are wasteful?
Feijóo and Sánchez during a debate in the Senate
It is true that this 110% public debt compares very unfavorably with the 102% of 2017, the last full year of the PP government, that of Mariano Rajoy. It is not a smaller distance, it is an additional 347,000 million euros, although well over half must be consigned to the pandemic response plan, as happened in the rest of the country.
A public debt crisis seems unlikely: the ECB is already touching its clothes
Whatever the cause, that growth is a problem for anyone. But the truth is that the relative trend in the Spanish case is one of clear decline, of almost 10 points of GDP in just over two years, thanks to growth and the European and Spanish stimulus measures.
But the stock of debt itself is not the only indicator of whether trouble is coming. Equally or more important is its cost, the amount of interest it generates. And the truth is that with Rajoy, in the referred year, they paid more than in the last one closed with Sánchez, in 2022. With the aggravating circumstance that in relative terms, of weight over GDP, in popular times it was even greater.
It could be argued that now that cost will continue to rise, until it ends up being a serious problem, since Christine Lagarde, the president of the ECB, made it clear on Thursday that she is not contemplating decreases at the moment. It is the argument of Feijóo and his. But it is evident that there is not much of a way left to rise in interest rates. The Frenchwoman explained in her last appearance that now it is necessary to know the data of the economic reality and not work with a previous scheme.
This for various reasons: financial instability; the evidence that economic activity is already being affected with a pronounced drop in demand and credit granting; and the global factors that have pushed inflation are losing strength, as in the case of energy.
But, above all because after what happened in the 2008 crisis and the turn of Mario Draghi, Lagarde’s predecessor, the ECB’s political culture already incorporates that, although it does not formally appear in its mandate, the economic cohesion of the euro area is in their hands, it is part of their obligations and there is no other institution in the European Union that can take the baton. And from that perspective, continuing with the previous pace of aggressive interest rate hikes would be a high-risk bet. Between inflation and the survival of the euro, the choice is clear. This is not an absolute guarantee against future economic crises, after all. Contrary to what many think, the economy is not a stable world, it is in permanent turmoil. But the simple reading of the data without attending to this political dimension of the problems leads to error.
In 2017, Rajoy’s last full year, the State paid more interest on the debt than in 2022
Just like the ECB, they have also taken good note in Brussels and are proposing new fiscal rules that theoretically combine the 60% debt ceiling reference, clearly symbolic and practically unattainable for southern European states, with a negotiated plan of reduction that does not destabilize their public finances. Without thinking that this is synonymous with broad sleeves for everything, it would be another serious mistake to think that the changes are made to impose more rigor and austerity than with the previous system. Nobody is interested in opening a new great political/economic crisis in Europe. If this occurs, it will be because it could not be avoided. We will see if Feijóo’s dark omens, which are based on the idea that the crisis is already here, come true or remain a simple pre-campaign heat.
