The impact of interest rates would have already reached its maximum impact on the economy, according to the Bank of Spain

The ICO Foundation and the Foundation of the Spanish Institute of Analysts have presented today in the Uría Menéndez auditorium in Madrid the conclusions of the Euro 2024 Yearbook, reviewing the evolution of the economy, monetary and fiscal policy. The Bank of Spain considers that The impact of interest rates on the real economy has already reached maximums between the end of 2023 and the beginning of 2024. This has been declared by its general director of Economy and Statistics, Ángel Gavilán, in a colloquium with Paula Conthe, general secretary of the Treasury and International Financing and Jeromin Zettelmeyer, director of Bruegel, the Bank of Spain

It is one of the main conclusions drawn from the presentation of the Euro Yearbook. Analysts now approach their projections based on a relief in the tension in economic policy. In fact, at the community level a moderate recovery in activity is already being observed: the faltering records of growth or slight falls are being left behind, although the recovery will not be accelerated or in a ‘vee’ pattern. The expected growth during the first two quarters will be 0.1% and 0.2%, respectively. “The deterioration or slackness of the general euro economy in 2023 would have reached its bottom”Gavilán explained.

The disinflation process with the highest interest rates in more than two decades has surprised. The positive side is that it has not lost as many jobs as in other regions, although it has affected activity, clarifies the head of economics and statistics at the Spanish central bank. It is planned that the turn to speak of the European Central Bank (ECB) changes the course of monetary policy already in June. “What investors are waiting for is that In two years the rates will be around 2%a lower level than the current -4.5%- but higher than that registered in the last decade (0-0.5%)”.

“In the EU, for better or worse, progress is made in moments of crisis and when we find ourselves on the edge of the precipice“, he lamented the Secretary General of the Treasury. It is one of the maxims that the Bank of Spain has defended: the union and cohesion of the bloc. “In an increasingly complex, fragmented and uncertain geopolitical context, the eurozone has basic principles of the rule of law and an open market economy that are important assets that will attract foreign investment,” Gavilán argued.

In the field of fiscal policy, Gavilán recalled that Spain must address a reduction of its deficit of 0.5 points of GDP per year with the new tax rules. The baseline of the new fiscal rules indicates how Member States can ensure that at the end of a four-year fiscal adjustment period, public debt is on a plausible downward trajectory or remains at prudent levels in the medium term.

The European perspective of the negotiation has been offered by the director of the Bruegel think tank, Zettelmeyer: “The proposal for the reform of fiscal rules tries to make the system more reasonable and adjusted to each country. After analyzing each country you can assume a consensus that you can comply. This reform philosophy has remained at 60%, It’s quite a bit better than the old system, but worse than it could have been. This 40% is not the fault of the Spanish presidency, which negotiated it and closed it in December. Getting France and Germany to agree is a very long road,” he declared.

The Yearbook edition

After the institutional presentations by Salvador Sánchez Terán, managing partner of Uría Menéndez, and José Carlos García de Quevedo, president of the ICO Group, the coordinator of this publication, Fernando Fernández, has summarized the main conclusions of this edition of the yearbook. Fernández has pointed out that in a world that is increasingly “more insecure and unstable” it seems important role for the European Union to remain as an “anchor of the system”.

In this sense, this year’s yearbook begins with a preliminary chapter on the political context, which analyzes how the fragmentation of the international political landscape, conditioned especially, on the one hand, in the military field, is influencing the European Union’s agenda. , due to the armed conflict caused by the Russian invasion of Ukraine, and on the other, due to the rivalry in the commercial field between the United States and China.

Furthermore, this year’s publication addresses the challenges of monetary policy, with special attention to the origins of the inflation that has been affecting the European economy and the growing need for liquidity of European banks and the consequences it is having on relationship with increased risk and preference for reserve accumulation.

Also noted in the report is the implementation of the new European fiscal rules, the long-term fiscal challenges of the EU and also in an analysis of some of the reforms carried out by Spain within the framework of its Recovery Plan.