‘Deleverage, Credit and Employment’

30/06/2014

    _ Escolano: “Since the end of last year, there is a new flow rising in Spain”

    _ González-Páramo: “at this pace, it will take us 18 years to regain the employment level of 2008. In order to avoid to do so we have to think about what is still pending in terms of reforms”

    _ Bartsch: “there are encouraging signs in Europe, and also in Spain, but we are still vulnerable”

The first day of the 2014 FAES Campus was completed with the round table “Deleverage, Credit and Employment”. Román Escolano, President of the ICO Foundation; José Manuel González-Páramo, former member of the Executive Board of the European Central Bank’s and Elga Bartsch, Morgan Stanley’s Chief European Economist took part in it. Miguel Marín, Director of the FAES Economy and Public Policies Department introduced the speakers and chaired the roundtable.

Román Escolano pointed out at the beginning of his address that “since the end of last year, there is a new flow rising in Spain” and that “a better evolution of financing and a better behaviour of investment lead to a better behaviour of employment”.

“Credit supply and demand are increasing. It can be noted that financial institutions are willing to lend and they will still be in the next three months. The same applies with regard to demand”, assured Escolano, who believes that “the improvement in the financing system is being reflected in more loans to companies, the turnover of which is less than a million Euros”.

The President of the ICO Foundation specified that “since October 2013, the volume of new loans to SMEs has increased by almost 5%”. He sent another positive message: “currently, exports are no longer the most dynamic element, but gross capital formation or investment in capital goods, as they have increased by 11% in the first quarter of this year”. “This is the scenario of the new flow of economy financing”, he stated.

CONSOLIDATED RECOVERY

González-Páramo stressed what, according to him, “is already becoming a consensus: recovery is being consolidated”. “It is not unlikely that we will grow until 0.5% or 0.6% throughout this third quarter”, he assured. And he added that “the implemented reforms have enabled us to start creating employment earlier than expected; this rises hope and strengthens the idea that, when economy is strengthened and reinforced, more employment per unit of GDP can be reached.”

However, he regretted that “at this pace, it will take us 18 years to regain the employment level of 2008; we have already travelled along the path, but there is still much to travel”. “In order to avoid to do so we have to think about what is still pending in terms of reforms: a real reform of the public administrations, to enhance productivity and to increase the attractiveness of the Spanish economy and–even if we did a lot at the beginning of this legislature–there is still a lot to do in the labour reform, especially in terms of temporary employment”.

Furthermore, he pointed out that “this recovery pattern is very similar to the past ones, with the growth of exports, generation of surplus, new credit flow operations, and growth of GDP and employment”. “The only thing that we are lacking is the credit stock to grow–he pointed out–and it is going to take more time than in other recessions, but all the other indicators are positive”.

MORE FLEXIBILITY

Elga Barstch stated that “there are encouraging signs in Europe, and also in Spain, but we are still vulnerable”. “Recovery might not be sustainable if some small external shocks happen–he warned–and economies are not balanced”.

However, according to Morgan Stanley’s economist “the fact that new jobs have been created is very encouraging and since the beginning of the year we can see an upward trend in Spain”. “Ireland is a good example, unemployment is decreasing a lot and creation of employment is increasing–she pointed out–what suggests that thanks to relevant reforms in order to be more flexible, the turning point in the labour market is possible”. According to Barstch, the challenge is for old construction workers to enter sectors such as the energetic or the digital and to fight against youth unemployment since the beginning.