Market reacted due to the prospect of losing control of accounts, says economist

In an interview with CNN this Friday (18), the chief economist at XP, Caio Megale, assessed that the market’s reaction to the criticisms that president-elect Luiz Inácio Lula da Silva (PT) made to the spending ceiling is due to the existence of a perspective of loss of control of public accounts.

“The market’s reaction has to do with the prospect of losing control of public accounts. Why can this happen? Because our debt is very high and our budget is very limited. At all times the management of public accounts has to be very attentive and what we felt in the last two weeks was a series of claims, new expenses and the size of the check grew”, he said.

This Friday, the president-elect once again criticized the financial market’s reaction to signs that the new government may disregard the spending ceiling to pay for social benefits. The petista said that no one has “authority” to talk to him about fiscal policy.

Megale also commented that removing expenses from the spending ceiling may discourage the government from executing social programs correctly.

“When you remove an expense from within the ceiling, you remove the government’s incentive to carry out the program well, because it is somewhat unlimited. So this sequence of signals that culminated with the text of the PEC gives a direction that the government’s intention is to spend more”.

Check out the full interview in the video above.

Posted by Pedro Zanatta, from CNN Brasil Business.