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The governor of the Bank of Spain, Pablo Hernández de Cos, has highlighted this Thursday the need to improve productivity and reduce unemployment and the timing for lowering the levels of inequality in Spain, which will suffer in addition to a “further deterioration” as a result of the health crisis.
During the presentation of the report of the Royal Institute Elcano ‘What Recovery or metamorphosis? Analysis and recommendations for the plan of economic transformation of Spain’, Hernández de Cos has stated that Spain has entered the crisis of the Covid-19 with levels of wage inequality and of wealth “clearly higher” than those observed before the financial crisis of 2008 and that these will increase with the health crisis due to labor income are most affected by this have been those of groups that were already in a more vulnerable situation: women, young people, workers with low educational level and precarious workers.
To reduce inequality, the governor of the Bank of Spain is essential to act on the labour market, increasing productivity and cutting unemployment and temporality. And at this point, and in the framework of the structural reforms that need to face Spain, “now more than ever”, Hernandez de Cos has advocated the redesign of the system of contracts to eliminate the “discontinuity” in the costs of dismissal between temporary and fixed, as “this is clearly behind” the high level of temporary employment in Spain.
at The same time, and to decrease the unemployment, the governor believes that you must redesign the active policies of employment , for example using techniques of ‘big data’ to improve the match between the needs of employers and unemployed workers.
Hernández de Cos has indicated that the measures of employment protection and of the incomes of the households adopted during the crisis, as the Income Vital Minimum or FATE, will help to reduce the negative effects of the crisis on the most vulnerable groups, but has insisted that reducing inequality in Spain requires us to adopt measures of a structural nature.
So, for the governor, the reforms, some of which has said that it would have to be done before the health crisis, are now more relevant given the “potential damage” and change “structural” that will cause the Covid-19 to the Spanish economy, and in addition to the challenges that it already had before the arrival of the coronavirus.
Between these structural changes that will bring a pandemic to the economy, Hernández de Cos has put the emphasis on two of them: the impact of globalization and digitization. In the first case, considered that “it is not ruled out” that “exacerbate” the protectionist trends that have been presented by many countries during the crisis, and has warned that this would affect very negative way to Spain for its increased openness to the exterior.
In the case of digitization, the governor has indicated that the health crisis has brought about a greater use of teleworking and electronic commerce, two consequences of “structural” that, although they do not have any negative effects, “require a response”.
Hernández de Cos highlighted the need to deal with the crisis and the period post pandemic “with more European and global coordination” . In his opinion, the joint action is the “most effective way” to cushion the effects of the crisis and spur recovery.
The governor has defended the restructuring plan in europe, but expected to be “the embryo of a future permanent mechanism of stabilization”.
Also, has pointed out that the short-term answers to the crisis must be linked to other, more structural, and in this sense has advocated for achieving the Banking Union, and a complete union of the Capital Market.
Although there is a gradual recovery of economic activity after the end of the alarm condition, Hernández de Cos has reminded us that the forecasts of the Bank of Spain point to a fall in GDP for the year 2020 of between 9% and 15%, with a contraction in the second quarter of between 16% and 22%, versus a contraction of 5.2% experienced in the first quarter.
Hernández de Cos has warned that the crisis will generate a high surge of public borrowing, which leads to a smaller margin of fiscal capacity to react to future crises in the future.
high levels of indebtedness, has said, generate needs permanent funding and submit to the Spanish economy to the ongoing “scrutiny of the markets” , so that he sees crucial to define a programme of fiscal consolidation that ensures the sustainability of the public accounts.