The Governor of the Bank of Spain, Pablo Hernandez de Cos, makes an amendment to the entire State Budget project with technical arguments. The senior official who is in charge of the considered best studies service in the country shares that public investment must be increased in the face of the pandemic, but neither the income nor expense forecasts raised by the Pedro Sánchez Executive are believed nor the macroeconomic picture on which it is based. Nor do you see All star measures such as the rise to civil servants and pensioners and the tax increases. In other words, everything that supports the bill of public accounts. In an appearance that lasted more than three hours, De Cos used a silk glove and official language, but crushed the government approach on all fronts.
1) Don’t create the macroeconomic picture
Hernández de Cos presented as unrealistic the economic growth forecasts of the Vice President of the Government, Nadia CalviÃo, from about 10% in 2021 thanks to European funds. The assumption of full execution of European funds and the multipliers of the use of these funds that assumes the General State Budget Project (PGE) seem optimistic in light of the historical and empirical evidence In relation to the capacity of our economy to mobilize funds linked to other European programs, in the last three European structural fund programs (of a lower amount than that foreseen in the new Next Generation program), after 7 years Once they were in effect, the absorption rate of the Spanish economy of available resources never reached 80%  ». In addition, he doubted that the funds will be used in projects with a multiplier effect on growth. He was also tough on the upbeat job outlook. While the macroeconomic picture of the PGE Project expects a drop of 0.8% in this rate, to 16.3%, the scenarios of the Bank of Spain foresee increases of between 2.3% in scenario 1 más optimista con la pandemia] and 3.5% in scenario 2. In addition, De Cos presented the recent growth in the third quarter as a mirage. A large battery of indicators would suggest that, throughout the fourth quarter, the intensity of this recovery has been losing momentum, evolution fundamentally related to the rapid increase in the number of infections in recent months. And, against the optimism of the Minister of Social Security, Jose Luis Escriva De Cos sees stagnation in the membership data for October, because  «unlike what happened in the preceding months, the year-on-year rate of change in membership did not decrease and remained at -2.3% TO”. Therefore, it sees Spain towards the worst scenario of the Bank of Spain, which foresees an economic collapse in 2020 of 12.6%.
2) Do not believe the expenses
The economist emphasizes that the increases in public spending of 70% in infrastructure, education or health, may not materialize in their entirety», due to possible delays in their effective processing. Instead, he sees spending on crucial chapters against the pandemic undervalued. Expenditure on purchases of goods and services, a heading that includes the acquisition of sanitary material, is expected to decline by 2.5% in 2021 after registering an increase of 14% in 2020 (predictably). In the same sense, it is also expected that unemployment spending – a part that, among other factors, in 2020 has been greatly affected by the activation of the ERTE – will fall by 36% next year. Faced with the continuation of the pandemic, go risks, therefore, of upward deviation in these items, difficult to quantify.
3) THE INCOME IS NOT CREATED
The Budget Project assumes that tax and social contribution income will grow by 9% in 2021, but there are three main factors that determine the feasibility of this forecast
: the collection capacity of the new tax figures [Google o Tobin], the sensitivity of the collection to the tax bases and, above all, the possible deviations from the GDP growth forecast.
4) DOES NOT APPROVE INCREASES TO OFFICIALS AND TAXES
The governor of the Bank of Spain is against raising the salaries of employees in a generalized way, as the Government finally proposes. It does so for two reasons: on the one hand, raising 0.9% would make officials gain purchasing power, since they foresee lower inflation, Â «in a situation in which, at the same time, it is materializing a significant job destruction in the economy as a whole and a very marked deterioration, without recent historical precedents, in the public accounts. On the other hand, it is an increase in public spending at a time of lack of resources to face the pandemic. Consequently, he proposes we are still on time that it would be more convenient if, instead of adopting generalized salary increases for public workers, the possibility of implementing, according to objective criteria, to more focused units within this group, for example, in health personnel
TO”. He was also critical of the government’s approach to raising taxes already in 2021.  «The economic recovery under way still shows obvious signs of fragility and is subject to considerable downside risks that do not advise a general increase in fiscal pressure right now. For this reason, it might have been preferable to delay the introduction of any of them until our economic recovery was more robust. Regarding pensions, he also questioned the revaluation of 0.9% for 2021 and pointed out that if it is also perpetuated over time, it will have to be compensated by other measures to avoid a growth of the dà © structural deficit close to 10,000 million annually. TO”
Facing these pressures of the aging population will therefore require increasing system resources or admitting alternative reductions in the rate of benefit. or additional increases in the effective retirement age. He insisted that since he sees a deviation from the deficit and debt objectives of the Government likely, adjustment measures will be inevitable throughout the decade for which he considers necessary a great political pact on the principle that the public accounts will have to be cleaned up. Â «It is imperative to design, as soon as possible, a detailed medium-term budget consolidation plan that is executed as soon as the pandemic is overcome and that, by reducing the financial vulnerability of the economy, helps to position the activity and employment on a path of sustained growth. ‘
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