By Eulogio López, in Madrid | The recently appointed Minister of Economy and Competition in Spain, Luis de Guindos, spoke just a few weeks ago to the magazine Consejeros (at the time he was a board director at Endesa) about the recipes Mariano Rajoy’s new government should follow to lead the country out of the crisis.
You have been Secretary of State for Economy before, and now we are living in an era of reforms, or austerity, if you prefer. Let’s start with employment, a matter that many consider to be the most important… What is vital is collective bargaining. Because what cannot happen is that when the going gets tough, the Spanish companies make adjustments by firing the temporary workers. This is the reason why the unemployment rate has almost reached 22% in Spain. It should be possible to modify the salary conditions, the salary too, of course, so that firing workers can be avoided. It’s the reform that was implemented in Germany in 2003: collective bargaining was decentralised, companies were allowed to negotiate their conditions with their workers, adapting to each specific situation.
Free dismissal? That is not the issue. The issue is a single contract with a growing compensation. And what we cannot keep on doing is playing with precarious job contracts, which is what [José Luis Rodríguez] Zapatero’s government did. But the key, I insist, lies in collective bargaining, which is what caused Spain, regardless of it not needing to be rescued, to suffer a great deal more unemployment than the countries that were rescued.
Financial reform. Is it necessary? Is it being carried out at a proper speed? Yes, it was necessary for two reasons: there was overcapacity and the real estate risk was very high. My impression is that we are behind and that the basis of the actions should be an adequate assessment of the real estate risk.
Bad bank? It’s an alternative, but this is not relevant. What is important is an adequate valuation of assets. In the frontispiece of my school one could read: ‘The truth shall make you free’. That’s it. The starting point is an adequate and transparent valuation of the problematic assets.
And the reform of the State? In Spain, between 2004 and 2010, public expenditure increased by 50%. That says it all. So, a rational agreement, as I call it, is necessary regarding important expenditure adjustments. The positive thing about the crisis is this: it allows the formulation of major considerations that were unthinkable at other times.
Why did ‘zapaterism’ increase expenditure to such an extent? Solbes assured us that it was them who had reached the budget surplus in the public accounts. Of course. Just like the fact that they found themselves with a public budget deficit of 0.2%. What happened to them? Well, in the first place, the real estate bubble burst. Due to this major event, they lost €30 billion in budget revenue: added value, document duties, etc. There it goes three GDP points. Then there were questionable decisions such as the Plan E that cost us €14 billion or 1.4% of the GDP…
You are an independent advisor to Endesa [this interview took place weeks before his government appointment]. The tariff deficit keeps on growing. In the first place, the energy sector lives in a constant state of regulatory uncertainty and this must end. And then, we have to be aware that green energy is ‘lovely’ but it is also extremely expensive and we must avoid it becoming unsustainable.
The new regulation of listed companies’ advisors’ retributions does not seem to make much of a difference. Shareholders, in the best of cases, shall be informed, but they will not be able to veto a compensation that may seem disproportionate. I am in favour of maximum transparency. An advisor’s remuneration must be specific in every category and, why not, it could become possible that the shareholders approve these salaries.
And with regards to executives? That should be responsibility of the Board.
This subject is being talked about because of the compensations made to the executives of the savings banks that were converted into banks. The fact is that if an entity has received public aid, then its executives’ remuneration should not only be known; they should be established by the FROB. We are talking about public money.
Fine. But those directors argued that those were contracts that had been stipulated previously. Very well. If they were agreed on beforehand, little can be done. But the salaries of the revamped entity should be approved by whoever gives the money. And this affects salaries, pension funds, and any other remuneration.
Retroactivity is not possible. It’s very complex. It does not surprise me that it causes scandal. With an unemployment rate of 21%, and a youth unemployment rate of almost 50%, when we are expected to make an effort, moderation is required.
And if the manager had been negligent, should s/he be brought to court? If s/he has been negligent or committed fraud: yes. Good or bad management has to be determined by the shareholders.
Do codes of good governance work? I believe in them. Even when they are not applied, they serve a purpose. For example, I believe that a basic rule is that an independent advisor should have clear time limits. I don’t believe that an independent advisor should hold his position for more than 10 years, precisely to be able to maintain his independence.
Should there be a mandatory retirement age? That really depends more on each individual. It depends on the lucidity of the protagonist.
But I can’t imagine an independent advisor facing the president of BBVA or of Santander. I think you would be surprised.