Business News & Financial News

Spanish economy 27th September 2022

Spain Has Executed Less Than 7 Billion Euros Of Next Generation Funds

According to the newspaper El Economista, the more than 14 months that have passed since the government approved its Recovery Plan, backed by European Next Generation aid, is now sufficient time to make an initial assessment of the management of the aid. There is an absence of official statistics on the funds that reached their final recipients. However, a comparison of EU statistics and the most recent statistics from the…

European politics, Relevant News Item 26th September 2022

The Right Wing Takes Over The Government In Italy

The coalition of conservatives, post-fascists and populists, led by Giorgia Meloni, won 44% of the votes in both Congress and the Senate, with 96% of the votes counted. “It is the time of responsibility, we will govern for all Italians”, said the very possible future prime minister after an election with a historic abstention rate. With a turnout of 63.9%, Giorgia Meloni’s Fratelli d’Italia had 26.2% of the vote, Enrico…

Jerome Powell baffled both the experts and the markets

World economy 22nd September 2022

Is Powell Ready To Do Whatever It Takes?

J.P. Marín-Arrese | While markets mildly reacted to the widely discounted rate hike and the prospect of protracted high-interest levels, the stern message delivered by Jerome Powell unsettled them. Stocks tumbled as he emphasised the Fed’s commitment to tighten its policy as long as inflation remains unabated, flying high above its 2% medium-term target. In short, he sounded ready to do ‘whatever it takes’ to curb the current price spiral….

“It Cannot Be That The Number Of Public Employees Rises And At The Same Time The Number Of Hours Worked Falls”

Almudena Díez | Ismael Clemente, CEO of Merlin Properties, explains that “What we are seeing today is that the adoption rate of teleworking in Spain is very low. In fact, it is one of the lowest, not only in Europe, but in the world. With the exception of the public administration, which has adopted it massively, with the risk of generating inefficiency” Q: A Bankinter director told us that the…

“In The Last Ten Years, While Consumption Has Risen By 1.3%, 24 Refineries Have Been Closed In The EU.”

“The Rise In Inflation Is Largely Due To Speculation. The ECB Will Not Be Able To Stop It By Raising Rates”

Lidia Conde (Francfort) | explains Marcel Fratzscher, president of the DIW (Berlin Institute for Economic Research) who headed the ECB’s International Economic Policy Analysis Department in 2008-2013. In an interview to be published in this month’s issue of Consejeros magazine, Fratzscher explains that “The ECB is habdicapped because it cannot tacle the problem by raising rates, neither this year nor the next”, which is why “I am not in favour…

“The Remuneration Report At Banco de Sabadell Obtained Over 38% Dissent Votes”

“Politics Would Have To Intervene Whenever The Market Transfers Wealth Creation Out Of Europe In A Disproportionate Way”

Christine Lagarde’s Pearls

On 8 September the ECB raised the interest rate by 0.75 bp. At the press conference that followed, Lagarde had to go all out:

Question: In December you were saying it was unlikely that rates will hike this year. In June you were saying that in July it will increase by 25 basis points, and it went up by 50 basis points. And you need to frontload now. Obviously, as you said earlier, you couldn’t forecast the war in Ukraine, you couldn’t forecast the gas embargo that’s happening but nevertheless, are you worried about the credibility of the ECB? Because every time you need to basically accelerate.

Answer C. Lagarde: On the need to accelerate, what I can tell you is that at this point in time, with the numbers that we have, with the dynamics that we see, with the sources of inflation, with the forecast that we have, we are determined to move. And to move at this timely pace that is referred to in the monetary policy statement, which means that as we are deviating from target, and with the high numbers that we have currently, we need to frontload, as we have this time around, and we need to continue hiking. That’s our determination. Yes, we had to accelerate, because when you are faced with new data, with new analysis, with new forecasts, you of course have to adjust. I think that our credibility will be judged by whether or not we return inflation to the 2% medium-term target as we are committed to.

Q- You’ve previously emphasised that the eurozone is in a different place from the US. The eurozone inflation rate is now about the US level. Does that mean actually they’re in quite a similar situation when it comes to inflation and the medicine needed is similar?

A- If you compare the situation of the US and that of Europe, and in particular in relation to inflation, inflation in the United States is largely driven by demand. In the euro area it is largely driven by supply. Not exclusively – there is also a portion of demand in the sources of inflation – but it’s predominantly supply. When you look at the labour market, which is an important phenomenon to appreciate, whether we have a risk of further escalation of inflation and second-round effect in particular, we see a US market which is – some of you say it, actually – “red hot”, where the rate of vacancy to unemployed person is 2 to 1, whereas, here in the euro area at large it’s 0.3 to 1. So for one vacancy we have three unemployed people. It’s a slightly different situation. A third difference is that, clearly, in their normalisation path and possibly tightening path, the Fed is starting from a different base from that of the euro area. We were starting from negative territory, moving out of it, and going further on that normalisation path. I think there are multiple other differences that I could give you, but I think those are the ones that will matter most for your analysis of the difference in inflation situation that we have.

Q- Is it easier to bring inflation down than to bring it up?

A-The future will tell, but what I can assure you is that we are determined to do so. Inflation is a terrible phenomenon, and particularly for the less privileged people. I think we are all aware of that. Our job is to return inflation to 2%, and we will deliver on that job. We should not expect, and nobody should expect that inflation is going to return to 2% in the next three months. Why? Because there is a lag time between the time when we make the decisions and when it actually translates through the transmission channels to the real economy. And also because it is still predominantly a supply-driven phenomenon. I cannot reduce the price of energy. I cannot convince the big players of this world to reduce gas prices. I cannot reform the electricity market, and I’m very pleased to see that the European Commission is considering steps to that effect, because monetary policy is not going to reduce the price of energy. Monetary policy will contribute to reducing expectations. It will give a strong signal to people that we are serious and that we will contribute to reducing inflation, but if the cause is predominantly supply-driven and based on energy prices that keep rocketing, this is for somebody else to do the job. But we will do ours; we will do our job.

…in the last week