The year-on-year rise in the Consumer Price Index (CPI) of 4%, mainly motivated by the rise in energy prices, has set off all the alarms. You have to go back to nothing less than September 2008 to get close to that figure.
Inflation supposes the chain increase in price of all products, from gasoline to bread, and fundamentally affects the average citizen. The middle and lower classes suffer more from these price variations, especially when wages do not increase and there is a loss of purchasing power. That is why it is said that inflation is the tax of the poor.
Well, the records of the Ministry of Labor reflect an average salary increase of 1.5% in the last year. A simple calculation is enough to verify that the increase in prices is 160% higher than that of salaries. Such an imbalance punishes savings and makes the rise in the Minimum Living Wage meager.
According to data for August.
It is difficult to abstract from this context and trust the optimism of the vice president Nadia Calvin. To begin with, Moncloa had a 2.8% rise in GDP during the first quarter of the year, but the INE has lowered it to 1.1%.
With the first scenario, Calviño assumed that the crisis would be left behind and the jobs lost by the pandemic would be recovered in the remainder of 2021. But the INE data reveal that the Spanish economy suffers more profound damage than was presumed, and inflation forecasts do not invite confidence in the comeback. The Bank of Spain warns that it will peak in November. And the monetary policy that fills the money market and allows Spain to finance itself at very low prices will not last forever.
It is true that the European Central Bank (ECB) maintains that we are facing a transitory phenomenon and that the situation is under control. But the global gas supply problem indicates that the electricity bill will continue to rise. Perhaps that is why so many experts put the ECB’s forecasts in doubt.
For instance, Kenneth Rogoff, the former chief economist of the IMF, suggests that the current scenario is increasingly similar to that of the 1970s, when the Middle East raised oil prices and triggered a global crisis. Given these warnings, it would be a mistake for Spain to lower its guard.
We all remember how countries ended up unable to tie the knot in uncontrolled inflation. Neither the government nor the European institutions can allow history to repeat itself.
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