Victoria Carvajal

The Most Unsympathetic of Inheritances

«The young people, trapped between two crises in only eight years, will now see their chances for a meaningful future slip farther away»

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The Most Unsympathetic of Inheritances
Foto: Emilio Naranjo| EFE
Victoria Carvajal

Victoria Carvajal

Economista empeñada en hacer comprensible y hasta entretenida la información económica. Madre feliz y actriz en sus ratos libres.

117% of all the goods and services produced by the Spanish economy in a year. To be returned with interest. That is the amount of Spanish public debt which at the end of the fateful year of 2020 was in the hands of pensioners, individual savers, investors, financial entities and, above all, the Bank of Spain and the European Central Bank, once its massive programme got under way for the purchase of financial assets, chiefly bonds and drafts issued by sovereign States. It is an indicator of the imbalance in public finance that has easily exceeded the unsettling limit of 100% of the GDP which was so hard to bring down after the Great Recession of 2008-2013, despite the monumental effort at fiscal consolidation.

It’s 122, 439 million more euros in public debt, an increase of 21.6% with respect to 2019. As a  percentage of the GNP it is the worst figure recorded in any of the previous economic crises in our democracy. And not just that; the European Commission calculates that this burden is going to continue growing until it represents 141.2% of the GDP in 2030. An extraordinary figure that makes us look like Greece when it was rescued by the troika in the earlier crisis and which is the most socially unsympathetic bequest you can leave to coming generations. Its payment will drain public resources from social services, education, health, infrastructure or Research and Development, key items in the budget for social cohesion and the country’s progress. Which means that young people, trapped between two crises in only eight years, the ones who have been hardest hit by unemployment and by unstable contracts as a result of the job market’s duality, will now see their chances for a meaningful future slip farther away. With no getting better.

So youth have no shortage of reasons to be pissed off. Their anger is also aggravated by a pandemic that has cut back their freedom and restricted their natural and urgent need to socialize. Their work experience today is even more precarious and on-again, off-again than it was before, if such a thing is possible. And their professional or university education now comes down to making the best of it from home with a computer or going out to fill orders on a bicycle in order to make a living. It’s all from Mars. Even granting this enormous adversity, the stubborn insistence on the part of some extreme political formations,  left or right, to use this discontent, first to harangue the young and then to legitimize violent acts during protest, is reckless or irresponsible. And all this coming about, spreading through the cities and finding cover in CDR (Committees for the Defense of the Republic) Barcelona because of the jailing of a mediocre rap artist with a criminal record,

They do not represent— I am convinced —, the great majority of frustrated youth who have worked so hard and hope to carve out a better future for themselves. And what’s ironic is that these political formations, which are so keen to explain the protests in an economic key, are the same ones that see no limit to public spending and look askance at any measure for fiscal consolidation in order to reduce the sentence on young people being condemned to pay this debt in the future. They think that is neoliberal and socially unsympathetic politics. When what is unsympathetic, without a doubt, is to bequeath that albatross of a debt which, today, because of political populism, gets those parties votes.

Mind you, fiscal consolidation is not incompatible with the efforts being made to ease the impact that the pandemic is having on economic activity, efforts which are fundamental in order to avoid an undesirable social collapse.  And which have the backing of a majority in Parliament. Whether it be the ERTE (Temporary Action for Regulation of Employment), loans from the ICO (Official Credit Institute) for small and médium-sized businesses, the deferral of bankruptcy, the mínimum living wage or direct aid to the sectors hardest hit, especially tourism: all this necessary battery of measures to dope up the economy, has, as the Ministry headed by Nadia Calviño recognized, prevented the GNP from falling by 20% instead of by the 11% that 2020 closed with, and kept the unemployment rate from multiplying by four.

But these measures, which have driven the deficit up from 2.86% in 2019 to 11.3% in 2020, answer to the moment. That is why the arrival of European aid from the fund termed Next Generation EU, an unprecedented fiscal response on the part of the EU, is essential to alleviate state expenditure: it means  more than 140,000 million euros in investment spread out over six years. In the hope that its dynamizing effect will eventually be taken up by private investment and demand.  These are timelines that are difficult to pin down and which depend on controlling the pandemic. And there is nothing to say, as some voices suggest, that it might not be an insufficient amount if the economic agony is prolonged.

For the time being 27,000 million have been budgeted for 2021. The third wave of the pandemic has shown that the allotment for the ERTE for the first trimester (21,000 million) was not enough, for these measures will be prolonged until May at least and probably beyond that. The same thing has happened with the expectations for tax revenues,  which were made mincemeat by the paralysis of economic activity. And what to say about the forecast for growth? 9.8% is the official figure which both the IMF and the Bank of Spain itself have lowered to somewhere between 5 and 6%.

It is not only the use of funds that is controlled by the conditions imposed by Brussels. The lifting of rules for budgetary rigor in order to deal with the Covid-19 crisis comes with an expiration date. And that is why it is important that the bipolar PSOE-UP coalition government not lose sight of their commitment to budgetary stability. Because inevitably  the “frugal” countries that have brought money to the table for non-repayable loans and accepted the temporary emission of European bonds will demand fiscal rigor from the indebted countries once growth returns to pre-pandemic levels in the eurozone. And while the majority of countries will meet that objective toward the end of the year, that will not happen in Spain, by Brussels’s calculations, until the end of 2022.

And as long the GNP continues below the figure attained in 2019, the weight of the debt will continue to grow as public spending grows. The danger is that the return to fiscal rigor, to the austerity that did so much harm in the earlier crisis, should be imposed before the Spanish economy has recovered. That is why it is important to choose projects wisely that stimulate growth in a lasting way and are not limited in time or cater to a specific clientele, like Zapatero’s  unfortunate Plan E  which made the deficit and debt soar. The question is that the greater the growth in the GNP the easier it will be to reduce the weight of the debt. And in order to rule out the worst-case scenario, which posits that the interruption of economic activity might be prolonged at least until 2022, the campaign for vaccination is key. And the Government is very far from meeting its objectives on this score: 70% immunized before the summer. As of today there are only 4% vaccinated.

But neither the vaccination nor the pandemic nor the spectacular rise in public debt with its dire legacy were broached in the session for Government questions this week, the first since December due to the exceptional circumstances of the State of Alarm. On the other hand, harsh accusations were exchanged over protests in the street and the limits of free speech. Partisan use was also made of young people’s frustration. To none of these young people were any of the representatives of national sovereignty capable of offering any kind of solution at all to their problems.

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