The Spanish economy is going to grow much less than budgeted this year. And expenses will grow much more. The GDP will increase by 4.3% when it should have increased by 7%. And pensions will have to be increased by 6%, which will be approximately inflation at the end of the year. Last month it was 8.4%. And on the horizon, a rise in interest rates for the summer. All this when the war in Ukraine has just begun and the pandemic has not yet ended. If we were to transfer it to the domestic economy, it would mean that we are going to earn 40% less salary at the end of the year, that we are going to have to help family members who do not work with more money and that with what we earn we will be able to buy fewer things while the installments of the credits that we pay are going to rise and represent a greater percentage of our income. In other words, we are going to be able to buy fewer things and in certain cases we are going to stop paying for some others. Between the noise of Pegasus and the hubbub of the right, the Bank of Spain has given this week a shocking figure: credits at risk of default already add up to 94,000 million euros. To give you an idea, Rajoy’s bank bailout in 2012 was 64,000 million euros. And the total European funds for Spain add up to 140,000 million. This picture of the situation is generating a lot of concern among businessmen and, normally, their discomfort is the anticipation of what the population as a whole will suffer.
From recession to stagflation
Yanis Varoufakis, the handsome Greek finance minister after the 2008 debt crisis, accused Angela Merkel of “austericide” because of the way the chancellor managed the European response. Germany refused to put more money on the table to plug holes in ailing economies until some spending was cut. It prohibited spending what one did not have and paying debt with more debt, because that could lead to high inflation and bankruptcy of public accounts. The common sense that millions of families apply in their daily lives. The price was a recession that lasted for years and along the way not only those who had taken the most foolish risks suffered but also many ordinary people. The uchronies are useless, but someone should one day say that without those recipes, the European capacity to respond to the next crisis, that of the pandemic, would have been much less. In case of an exceptional problem, Merkel did support an expansionist policy of higher spending and public debt, as thousands of families do when an illness strikes them. It is one thing to go into debt to pay for medicines and live while the doctors treat you and you cannot work, and quite another to pay off an outstanding credit with a new loan to go on vacation. The challenge is that just when it was time to change the economic cycle due to the arrival of inflation, another crisis has superimposed itself, the one derived from the war in Ukraine that has made raw materials more expensive and paralyzed consumption. We enter another black beast of the economy as dangerous as recession, stagflation, when the economy does not grow and prices do. Companies that have credits worth more than 60,000 million and are not going to be able to repay and families that add loans for more than 30,000 million are trapped in this clamp.
In this context, the annual meeting of the Cercle d’Economia is being held this week in Barcelona. The previous manifesto of the board advocates for achieving State pacts to preserve social peace. Surely, Alberto Ñúñez Feijóo will be more receptive to this recipe than Pablo Casado was last year to that of pardons to promote national peace. The great unknown is how Pedro Sánchez will take it. If he were someone else, we would say that he arrives exhausted at this new challenge for the Spanish economy and society. He accumulates so many match points in his career that this week has almost seemed like child’s play. But, for those entrepreneurs and those families at risk of default, the anxiety of not knowing if gasoline is going to rise 20 cents overnight and gas is not going to stop getting more expensive generates enough uncertainty to stop investing, to stop consuming and to vote. Or in the worst case, to lower the blind, stop paying debts and vote for the first party that comes forward and offers the security of shouting and coercion. That risk is almost greater than that of the 94,000 million. It is social peace.