The Bank of Spain urged to adopt structural reforms, both immediate and extended ERTE

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Pablo Hernández de Cos, the governor of the Bank of Spain, has not left a stick without touching on the Commission for the Reconstruction of Social and Economic of the Congress of Deputies. is R eformas structural extension of ERTE and guarantees of the ICO, promotion of employment, fiscal consolidation… A battery of measures so that the crisis is as least harmful as possible to the economy of our country. But the direction of Spain may not be alone in the hands of the Government, but all political actors: “The strategy should be based on broad consensus, so that you can have a vocation of permanence and be credible”.

“The design and implementation of the reforms should be accelerated, given that its formulation credible can generate positive effects on expenditure decisions, investment, and hiring even in the very short term,” he said. In this sense, has advocated for give Spain a “ fiscal impulse in the early stages of recovery , which allows to also support the restructuring of our productive fabric”. All of this using the background of the european recovery to boost certain investments that suffer further contraction in times of recession. And has emphasized the need to encourage technological development, foster the formation and expedite the projects to a more sustainable economy.

Among the measures that the governor of the Bank of Spain has put on the table face in the short term -beyond that generality fiscal impulse – are the government guarantees and STRONG . For this reason, he emphasized “studying the possibility, depending on how the development of the economic activity, to extend the mechanisms of public assurance, in which redesign should be based on access to these resources from companies with solid perspectives of viability”; and, also, to extend the ERTE in certain sectors or companies “that will continue to be very affected by social distancing measures”. All to avoid future bankruptcies, providing lines of liquidity as it has done now through the avalaes the ICO.

Of Cos has impacted on progress towards fiscal consolidation in the medium term to ensure the sustainability of public finances

Precisely, the extension of the ERTE is still aground in the bargaining between the Executive and the social partners. Yesterday held a new meeting without reaching any agreement, but with advances in their demands. On the 30th of June, of not getting to make a pact, shall be dropped and the facilities and support to this measure.

Of Cos, therefore, called on the Government not to withdraw prematurely measures that are working to sustain the business and even go beyond in the short term. Your objective is to save companies from the largest number of bankruptcy filings possible. Therefore, the governor proposes to undertake an urgent review of “the processes of restructuring, insolvency and relief of the financial burden of the companies. is Must be set administrative procedures streamlined and simplified . In particular, corporate debtors with financial difficulties should have the ability to access to a preventive framework that would enable them to continue with their business when they are still viable.”

the Sustainability of public finances

in Spite of the messages that is urgent to activate the economy, Hernández de Cos is aware that the public debt is moving towards levels not seen in the last hundred years (120% of GDP) . The governor has recognized that “the persistence in time of these levels of public debt would reduce the margins of fiscal policy to cope with adverse shocks, would expose the economy to a situation of chronic vulnerability to changes in financial market sentiment and lastraría our capacity for growth.” For this reason, it encourages the Government to reach a consensus with the other political parties a series of structural reforms, in draft, to make sustainable public finances.

The “fiscal consolidation” -reduction of deficits looking for by cutting spending and increasing revenue – focused too, as well, a good part of his speech in the Lower House. “The fiscal consolidation has to be implemented once the economy recovers a path of solid growth, but its definition and communication early would have significant benefits for the credibility of our economic policy,” he said. In these moments recognizes the need to give the economy an impulse to the public, but also think about what will come after.

The governor of the Bank of Spain puts the view to eliminating tax exemptions in the personal income TAX and corporate Tax

So, Of Cos has called for an “comprehensive review” of the tax system to achieve increase and improve the revenue collection capacity of the Admnistraciones Public. Without giving great details, but the whole purpose is to ensure the sustainability of the public accounts in the medium-long term. In this sense, has been recommended to look at ourselves in the tax systems of other countries of our environment. And has put the view to eliminate bonuses in the personal income TAX or corporation Tax, as, in its judgment, there is an excessive level of them: “There is a very high number of tax bonuses. The types of marginal are not very different from other european systems, but the tax rebates are the average rates end up being much more low”.

At the level of the job, the governor has signaled that it is essential to mitigate the duality between temporary and permanent contracts in the Spanish labour market, seeking to avoid the adverse effects of a country with an excess of temporary work, as is the increase in inequality and the ballast to the careers and productivity. And in the matter of pension, as usual, has made an appeal to tackle the problem of the sustainability of the system by using, for example, the sustainability factor that links the pension to the life expectancy, as is already the case in other european countries.

public Banking

Several deputies took advantage of the summons to the governor to ask him directly about the possibility of creating a public bank in Spain. An idea that comes from games like United we Can, the CUP or CKD , but always rejected by all governments.

Of Cos has not been cut off in his response, despite his position. Your constestación has been resounding rejection of it. “I don’t see this market failure as to require today a public bank. Private banks engaged in the work of giving access to finance to businesses and households adequate, that is to say, by measuring the risk. If you want to, that may be the case, a public bank for financing households and companies with excessive risk, we will not grant a loan, give them a grant. This Parlamneto have the instruments. Fiscal policy already has tools to do that with discretion”, he said. A clear message to those members of the Executive that each time has brought to light that speech, as in the case of United we Can.

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