Cherries in S’Agaró, by Joan Tapia

A cautious optimism and very tempered by uncertainty was the dominant note of the annual meetings of S´Agaró (twenty-sixth edition) last weekend. From Luis de Guindos, Vice President of the European Central Bank (ECB), to the Governor of the Bank of Spain, Pablo Hernández de Cos, and the president of the Chamber of Spain, Josep Lluís Bonet, They all stressed that the recovery is here, but that there are also serious risks both due to the unknowns of the pandemic and the inflationary upsurge in recent months.

On Friday, the opening day of the meeting, Stock markets around the world suffered a sharp drop due to the news about the omicron, the new variant of the coronavirus originating in South Africa, which floated the possibility of new restrictions on international travel and tourism that would be a terrible reversal. The recovery is palpable because Goirigolzarri, Chairman of Caixabank, indicated that card payments increased by no less than 20% in October, not compared to 2020 very affected by the pandemic, but compared to 2019. It is true that the pandemic has triggered the use of cards, but 20 % indicates high consumption. The worrying thing is that the new variant deflates expectations despite the fact that yesterday the stock markets recovered ground.

But, omicron aside, the greatest uncertainty comes from inflation, which in a few months has gone from being well below the ECB’s objective of 2% – which allowed and encouraged an expansionary monetary policy to get out of the crisis – to being in October by 4.1% in the euro zone and 5.4% in Spain (6.2% in the United States). What is disturbing is not knowing if this inflation is a temporary phenomenon generated by the bottlenecks of a quick exit from the crisis, as the ECB still tends to think, or it will become more permanent and dangerous by, among other things, a self-fueled race of prices and wages.

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Guindos, who for years has been a regular at S´Agaró and whom Anna Balletbó, engine of the meeting, predicts a great future, he did not hide his confidence in the recovery or his concern. The recovery is strong, but if the average inflation for several months in a row (not the one-off two or three) reaches 4%, the ECB would be forced to raise interest rates, which would punish growth. We are not there yet because the average Spanish inflation of the last twelve months is not 5.6% in November (the bad provisional data of yesterday) but 2.6% because at the beginning of the year it was very low, but the trend runs the bloodstream. Guindos, who sees things from Frankfurt and not from Madrid, did not want to hide that the ECB could not tolerate – because doing so would make things worse – a sustained average inflation of 4%. And the governor of the Bank of Spain appealed to the responsibility of the social agents because the rise in interest rates would punish not only families and companies but also the spending capacity of the State.

In any case, Guindos – vice president of a central bank, entities that tend to speak with a certain arrogance – wanted on Friday to emphasize that economic forecasts are always a far from infallible exercise to foresee the future and that, in the current variable circumstances, the authorities should do them with great humility because the uncertainty is very high. Was it the polite way of the vice president of the ECB to draw the attention of the government to some triumphalist forecasts that are not being confirmed?

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