The changeover at the Bank of Spain and the ‘lame duck’ moment

The Bank of SpainPablo Hernández de Cos, Bank of Spain's governor

Aurelio Medel (5Días) | Power manifests itself through the occupation of spaces and is exercised through the application of a programme. First the chairs, then the BOE (the Official Stare Gazette) . This is how the change of a country’s government is transmitted. Then the legislature advances and the viscous period comes in which the end of the cycle is glimpsed, causing the pieces to shift. This happened in the first half of last year in the central government. A change of tenant in Moncloa was predicted and a good number of senior civil servants who held political posts began to apply for international posts in search of a better position (Nadia Calviño, Xiana Méndez) or to hibernate until another opportunity arose.

The surprise was that Sánchez did not leave La Moncloa; but more incredible was that six months after his investiture he collapsed and had the country in suspense for five days with the threat of resigning. He came out promising continuity, but has caused the idea to spread that the Spanish government has entered the lame duck stage, which is what they call in the United States the last two years of the president’s second term, which are his last, as he cannot stand for a second re-election. Pedro Sánchez affirms that he will run out the legislature and that he can be a candidate again. The facts suggest otherwise, and precedents detract from his words.

The appointment of Carlos Ocaña Orbis as a director of Telefónica, representing SEPI’s shareholding in the company, which is heading towards 10%, is a further symptom of this perception of the end of the cycle. It is not a question of questioning his worth, no. The point is not to question his worth. The point is to appoint to such a post someone so close to the Prime Minister – with whom he wrote the book La nueva diplomacia económica de España – just as he comes out of retirement, fed up with the attacks on his family.

The PP’s outrage at the government’s appointments to companies such as Telefónica, Red Eléctrica and Indra is as predictable as it is irrelevant. One only has to recall the time Eduardo Zaplana, Alfredo Timermans (a senior official under Aznar) or Iñaki Urdangarín, then son-in-law of the King, spent in the top management of Telefónica on huge salaries to appreciate the value of their criticism.

The government’s appointments are significant, but they are dwarfed by the immediate changeover at the Banco de España, an institution governed by ECB regulations and its statute of autonomy. Pablo Hernández de Cos leaves the post of governor on 11 June to complete his term of office, and it is not yet known who his successor will be. Names with different profiles are circulating; some are driven by their female accent, others by their experience in supervisory bodies and some by their closeness to the president of the government.

It is true that the post of governor of the Banco de España has been partly diminished by the strength of the ECB, but its criteria, its informed opinion, continues to be very relevant, so that it has a great impact on political decisions. The Bank of Spain is often the bogeyman of the more left-wing approaches (Podemos, Sumar, the trade unions), which tend to label it as liberal, sometimes accompanied by the prefixes ultra or neo. The rise in the minimum wage, for example, is one of the reasons for confrontation, given the supervisor’s insistence that it destroys jobs. It is the Bank of Spain’s capacity to influence public debate that may obsess the governing party and lead it to give in to the temptation of appointing a governor who will go along with its policies.

Since Franco’s death, eight governors have been appointed, five of them under the statute of autonomy (1994), which is the one that established the non-extendable six-year terms, so that they would not coincide with the four-year maximum of political legislatures. Of these five governors, three (Luis Ángel Rojo, Luis María Linde and Pablo Hernández de Cos) had been at the Banco de España for decades before being promoted to the top of the pyramid; another (Jaime Caruana) was a newcomer to the palace in the Plaza de Cibeles when he was appointed by José María Aznar, and the last (Miguel Ángel Fernández Ordóñez) was the only governor who was a party activist (PSOE) and had never worked at the institution.

The appointment of Fernández Ordóñez, who was heavily criticised by the PP for his political profile, took place during the government of José Luis Rodríguez Zapatero. He was proposed by Pedro Solbes, who, fearing that Miguel Sebastián would impose someone from his entourage, went ahead and offered his deputy, the former Secretary of State for Finance and Budgets, as his deputy. To make matters worse, Fernández Ordóñez had to manage the crisis in the financial system, with the collapse of many of the savings banks, and his profile did not help him to find complicity in the PP, which had placed illustrious members of the party such as Rodrigo Rato (former vice-president and Minister of Economy) and José Luis Olivas (former president of the Generalitat Valenciana) at the head of large institutions such as Caja Madrid and Bancaja, which had to be rescued, now under the name of Bankia.

Is there a risk of something similar happening again today? The level of confrontation between the government and the PP makes it difficult to reach a consensus on appointments, as has been the case for decades, with the former proposing the governor and the latter the deputy governor. Added to this is the temptation to appoint someone close to you, thinking that he or she will owe you for no less than six years. And, lastly and most dangerously, there are many precedents that point to more arbitrary decisions being made during the lame duck period. Pedro Sánchez is showing less than reassuring symptoms, and the insistence on appointing Dolores Delgado is yet another. The head of the Bank of Spain should be off the political and personal agenda, and there are great professionals who fit the bill.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.