The year could not have started any worse. The snowstorm, despite its size and exceptional nature, became just a story amid the global worsening of the pandemic and all its consequences. Vaccines, ironically the fastest created in human history, are set to arrive late to this third wave. A fourth wave is likely to occur in most countries that were able to access the vaccines, which unfortunately, is not all countries due to supply constraints and market rules.
In Spain, the crisis is leaving substantial scars on activity, employment and the productive fabric (SMEs), which is also affecting an economy still reeling from the previous crisis, and which already had vulnerabilities in the labor market, public welfare system, education, industry structure and savings.
“Promoting nominal growth, making the economy more flexible and strengthening fiscal sustainability”
These vulnerabilities exposed us to COVID-19 in a different way, causing a further fall, and will limit the country’s ability to recover (Spain’s 2019 output level will not be recovered until the end of 2022). These vulnerabilities may lead us on a path of very limited long-term growth, with both social and sustainability implications for public accounts.
However, Spain is a great country that has overcome all its historical hardships, and this time will be no different if we do things right. Now is the time, because, unlike the previous crises, a united Europe will mobilize 750 billion euros to help with the recovery. Approximately 140 billion of this—equivalent to more than 10 percent of GDP—will be for Spaniards if we are able to propose a program of projects and reforms aimed at fundamentally strengthening supply factors based on three pillars: promoting nominal growth, making the economy more flexible and strengthening fiscal sustainability.
“Making the economy more flexible goes hand in hand with structural reforms”
Nominal growth requires reinvigorating productivity, for which we need to update our skills, especially digital skills. Increasing capital contributions, and importantly, the value of intangible assets, and increasing the contribution of labor, reducing structural unemployment and promoting the participation of women and senior citizens will be essential. This growth must also be accompanied by a general regaining of confidence and a recovery in debt levels.
Making the economy more flexible goes hand in hand with structural reforms. These reforms must reduce structural unemployment, accommodate the productive model resulting from the pandemic—as we did in the aftermath of the real estate crisis—and accelerate our ability to grow. Of course, this necessarily involves, among other things, digitization and the (supervised) opening of markets.
“The transparency of the whole process requires better public and private governance”
Future fiscal sustainability, in addition to the necessary and credible rationalization of spending that has to go beyond 2022, must be supported by the promotion of intermediated financial savings and the sustained growth of fiscal resources that will necessarily come from the higher nominal growth as mentioned above.
Our future depends on us. If we succeed in making education, innovation, digitization, energy transition and the internal structuring of the country our priorities, we will be taking great steps toward a path of sustained and vigorous growth.
The transparency of the whole process, especially this injection of European money, requires better public and private governance and guarantees that the projects undertaken will survive the economic cycle and do not bear the risk of merely being income transfers.
The path that is right for us also requires us to share responsibility with the private sector. The pursuit of public-private participation allows risk sharing, and not just income, which helps public investment decisions to be economically sustainable over time.
Throughout the pandemic, we have shared a hashtag that has become a mantra in light of COVID #InMAPFREMoreUnitedThanEver. I am certain that being united is also an indispensable requirement to overcome this crisis, which we will certainly do.