Following the publication of the Financial Stability report, Bank of Spain governor Pablo Hernández de Cos flagged that the situation of companies, households and the banking sector is more favourable than before the global financial crisis. But he warned of the magnitude of the economic deterioration in the short term, as well as the uncertainty about the duration and heterogeneity of the effects of the pandemic. In particular, he argues that priority should be given to instruments which strengthen the capacity for economic growth and EU coordination.
On fiscal policy, he highlights the significant increase in public debt, which will have to be faced once the crisis is over. The governor points out that it will be necessary to implement a medium-term fiscal consolidation programme and implement the necessary structural reforms.
Amongst measures already implemented, the Bank of Spain flags that the only one with a “well-defined” budgetary impact is the increase in healthcare spending, at 4.4 billion. The rest of the measures will have a “potentially high” impact on the deficit, of “uncertain magnitude.” These include the granting of public guarantees for corporate loans of up to 102.4 billion euros, the 6-month moratorium on mortgage debts for SMEs and the self-employed to the tune of 22.8 billion, or the postponement of tax payments until May 20 worth 3.5 billion.
