He considers the pact to moderate wages and benefits “urgent”, although companies “are tempted” to increase their margins
On the same day and at the same time that the inflation figures for July and growth for the second quarter are made public – one for lime and one for sand – economy number two Gonzalo García Andrés (Madrid, 1973) analyzes for this newspaper the impact of the price increase. He contrasts it with the sharp rise in GDP and anticipates how he sees Spain’s evolution after the summer in the face of the threat of energy austerity and slowdown.
-Prices are up almost 11%. It doesn’t seem to stop…
-We had already foreseen that inflation would remain high in the summer months. Last July there was an eight-tenths drop as a result of the measures the government started taking in June, leading to a base effect that drives inflation up. Because prices have fallen two tenths of the previous month, but less than last year; therefore inflation has risen on an annual basis. It is also true that there are already some signs of a decline beginning in the fall and deepening into the later part of the year.
He’s talking about drawing. Which are?
–On the one hand that fuel prices have fallen and on the other the international prices of raw materials. In recent weeks we have seen that these important commodities are already falling, as the origin of this inflation episode is precisely this general increase in commodity prices and the effect it has had on the cost of businesses, energy, construction materials, fertilizers used to produce food… We are already seeing a moderation in these prices at an international level which will of course translate into a moderation in prices at the domestic level.
–How long can Spain last with these runaway prices?
– The resilience and solidity of the economy is evident from the data we have seen this week, both on GDP and employment trends. We are in a solid position to tackle this inflation problem, the main problem we have. For this reason, we must have confidence in the data that shows that the business fabric is solid and solvent, hiring, investment and, moreover, that families have jobs, salaries and stability. Especially to be able to cope with the coming quarters, which are complex. And that we also see from the forecasts of all international organizations that it will take longer than we expected for lower growth and higher inflation. But Spain is in a strong position to deal with it.
– Quarters of crisis, is that what we are dealing with?
– We have endured a much worse situation, such as the pandemic. And we have seen that with the right measures we can emerge faster, more balanced and above all with a more sustainable pattern, fairer and more focused on employment and recovery of wage income. Inflation is a very difficult challenge, but we have the conditions, both because of economic policy and the responsibility of social actors, to overcome this episode as well.
– Aren’t you afraid that this growing situation will be diluted like a little sugar when the summer returns?
-No, of course it is not diluted. And I think we’ve factored that into the forecasts. It makes sense that these GDP and employment growth rates could be tempered. The important thing here is not so much that we grow a little bit more or less in the face of a situation that we cannot control as we have now, but that with the economic policies and the strengths of the Spanish economy we continue on that path of grow.
-Inflation originates in energy, but has already spread to the entire shopping basket of citizens.
What is happening now is that cost increases are passed on in prices. With the widespread use of electricity and also fuel, this cost increase is also widespread. For this reason, it is now very important to distinguish between this effect, an increase in costs resulting from an exogenous increase in commodity prices, and what may be second-round effects already associated with the response of economic agents to this cost increase. For now, we have no evidence that they occur. And it’s very important that we know how to dodge them with an income agreement.
– When is this agreement?
– It is urgent to close it at the beginning of the summer to avoid these second-round effects and to make the inflation decline as quickly and sustainably as possible. That has to do with operating margins and other capital income. Of course I am sure that the unions also understand this situation with moderate wage growth. And it is also possible to do it with a longer period.
–But how can you trade on corporate profits from a law?
–In a situation where there are sectors where demand has recovered very strongly, a commitment to stability of the margins of some companies is essential. The temptation they may have, especially after the very difficult phase of the pandemic, is to expand them. But that would be a short-term and unsustainable decision. It’s about looking a bit into the future and not trying to get the profits that in some cases can be inferred from the situation we face.
-The government forces have already submitted the proposal to tax the income of banks and electricity companies. Is it the time?
–We trust that you understand the exceptional nature of the situation, the temporary nature of this contribution and that it is important that we all commit ourselves. In the case of banking and when it needs it, I believe that society as a whole has contributed to stability, to how important banking activities are. What is now being asked of them is a contribution. It’s fair and people understand it.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
