Emilio Ontiveros: “We find ourselves in the hands of incapable institutions”

By Fernando Rodríguez, in Madrid | Entrepreneur and shrewd analyst, the Spanish media often seek his help as an economist: Emilio Ontiveros is board director of Torreal and Mútua Madrileña, and we had the following conversation with him for Revista Consejeros.

What is your opinion about the current economic governance of this crisis? The IMF, the G-7, G-20… The discrediting of the ECB and the EU seem clear enough at this point. There is a significant asymmetry between the severity of the problems, their global extent, and the absence of institutions actually capable of facing them. It's true. At global level, we find ourselves in the hands of institutions that are not up to the circumstances. What worries me is that the euro zone suffers serious government shortcomings. The increasing risk aversion showed by investors has more to do with the inability of the euro zone to offer responses than with the public finances' deterioration.

With regards to Spain, will it be enough to have introduced in the Constitution a budget deficit limit? It looks like a capitulation, as if politicians accepted that they are unable to control a simple measure of fiscal policy. The constitutional reform was not strictly necessary. Moreover, by doing it so hastily and in the absence of any debate, it looked as if we did not trust ourselves and we were self-imposing a deficit control. The Spanish legal system has other mechanisms to achieve the same goal. Had it been formalised without rush, it'd have had a more positive effect. Governments are important, even with a monetary policy that has already been transferred to Frankfurt. Breaking our constitutional tradition in that way was not the most sensible decision.

What is the condition for the credit to Spain to be restored? A lot depends on what happens in the sovereign debt markets. The expectations are not exactly favourable in the very short term, but if we can reduce some risk aversion in the public debt markets and tensions subside, we could start a normalisation of credit flows even though we will see far lower levels than what we experienced a few years ago. That is, we'll basically see that the credit moves out of the current negative trend. But there is no life without credit, even if we change the evaluation criteria; only when banks have access to wholesale markets again and meet the exigencies of their liabilities, the credit will gradually begin to grow.

But markets seem insatiable and governments do not stop making concessions. Yes, there is an element of intimidation and undue sacrifice, particularly in the bond markets. In some cases, their power of intimidation is comparable to the gods'! What happens is that sometimes the gods are capricious and when you bring a public deficit control, perhaps what they are asking for is growth. So you have to be able to take on the markets. They do so in the US.

From here one can not… Markets sometimes act in a very rational and efficient manner. But you are not to doubt. The markets penalise the indecision and lack of governance in Europe.

You have been critical of the level of supervision of financial institutions. Regulated sectors must be closely monitored, guided and, in occasion, even ordered to do certain things. Bakeries need not do so, but with banks and savings banks, which sometimes require public money, there must be obedience and respect for the supervisor, absolutely, whether in the US, in Spain or in Germany.

How important for the euro zone recovery are tools like the Eurobond issuance or the option of a coordinated fiscal policy between Germany and France? They simply are instruments of what would be a euro zone federal government and public Treasury… What is required is a joint responsibility over the debts. Markets want to see euro bonds and a centralised Treasury.