J.P. Marín-Arrese | Now that the monetary tables are turning, it is not at all prudent to indulge in overspending. Inflation undoubtedly has a dampening effect by automatically raising fiscal drag while lowering liabilities in real terms. But if the slowdown deepens, the most vulnerable countries could once again come under suspicion. This is a real risk, no matter how much we try to ignore it.
In such turbulent times, putting public finances on a sounder footing is an indispensable objective to avoid unpleasant surprises. The benign neglect with which Brussels welcomes public deficits cannot be invoked, at least for the time being. In a context of increasingly demanding credit conditions, markets will soon penalise imbalances. Especially those whose sustainability casts the greatest doubts. Our country is high on this list. That European funds help us to spend more than we take in is self-evident. It is far from plausible that they are a panacea, as we would like to be convinced. Especially when we see the disappointing absorption rate and the dubious usefulness of the items on which they are spent. It is not all the government’s fault. Brussels’ determination to limit the use of funds to promoting the green and digital economy has led to an allocation of resources that is not at all adapted to real needs. We are essentially a country of unsophisticated services, with a small industrial base that faces many difficulties. The idea of building a new economy is nothing short of a chimera.
A checkbook can only bring temporary relief, aggravating the already delicate budgetary situation. Trying to solve everything from the public sphere, at the stroke of a BOE, far from overcoming the problems, aggravates them. Our economy, like others, faces the challenge of a transformation forced by profound changes in demand and productive conditions. The government must facilitate a task that is incumbent on business by easing their burdens and by reducing the raising of resources for non-essential, if not superfluous, purposes. It is not enough to lower GDP growth expectations that were significantly out of line well before the conflict in Ukraine. There is an urgent need for a rigorous public spending policy without waiting for the markets to impose austerity by force. We do not have much time to put our house in order.