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Presentation at the National Bank of Greece
The document discusses the economic crisis and recovery in Spain from 2008-present. It describes the crisis response as initially focusing on fiscal stimulus but shifting in 2010 to structural adjustment through internal wage devaluation, labor market reforms, and fiscal devaluation. While this approach reduced macroeconomic imbalances, it also depressed domestic demand and income inequality grew. Long-term growth foundations remain weak due to issues like high debt, low investment, unemployment, and poverty. Bolder actions are needed to strengthen competitiveness and boost research, education, and social cohesion.
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Presentation at the National Bank of Greece
- 1. From crisis todevelopment Athens, 29th of April 2014 José Moisés Martín Carretero
- 2. Not aimedat promoting growth but at facing macroeconomic imbalances in absence of monetary policy: ◦ Reduction of public deficit ◦ Internal wage devaluation: labour market reform ◦ Fiscal devaluation ◦ Financial reform and deleveraging ◦ Liberalization of markets Two phases: ◦ Between 2008 and 2010: Keynesian fiscal stimulus and automatic stabilizers ◦ Since 2010: structural adjustment
- 3. -150 -100 -50 0 50 100 150 200 250 300 350 BillionEuros Deleveraging process Gross Savings Grossinvesting Current Account Government Balance Leverage Deleverage
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- 8. 0 5 10 15 20 25 30 15.000 16.000 17.000 18.000 19.000 20.000 21.000 Employment (thousands) (leftaxis) Unemployment rate (right axis)
- 9. 80 85 90 95 100 105 110 115 120 Index2005=100 Unit Labour Costs:nominal and real Nominal Real
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- 23. Imports as %of national demand %ofnationaldemand
- 30. Capital andinvestment Innovation Human Capital Total factor productivity
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- 33. 0 5 10 15 20 25 %RateofUnemployment NAWRU (non accelerating wagerate of unemployment)
- 34. 10 12 14 16 18 20 22 24 %ofpeople15-29yearsold Young People notin employment nor any education and training European Union (28 countries) Spain
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- 36. -001% 000% 001% 001% 002% 002% 003% 003% 004% Average 2000-2007Average 2008-2012Average2013-2016Average 2017-2021 Annual potential growth average
- 37. Europe 2020 TargetLast data Employment rate 75% 59,3% R+D Investment 2% of GDP 1,3% of GDP Greenhouse emissions -20% from 1990 +21% from 1990 Renewable energy 20% of total energy 16,05% Energy efficiency 20% - School early leaving 10% 24,9% 30-34 years old with tertiary qualifications 44% 40,6% Poverty and social exclussion -1,5 million people in poverty. growing
- 38. Internal devaluationhas led to a wage reduction and worsening income distribution. Internal demand has been strongly depressed. In spite of efforts, Public deficit and debt still being far away from Stability Pact target. Deleveraging of economy is being too slow due to the low inflation. International competitiveness gain is almost purely cyclical. Decrease of household disponsable income, and higher inequality of income, led to an increase of poverty and social exclusion.
- 39. Due tothose reasons, foundations for long- term growth are weak: ◦ Financial impediments for a higher level of investment. ◦ Lack of investment in R+D ◦ Long term unemployment to become structural. ◦ “Lost generation” of young people ◦ Weak social cohesion and political mistrust.
- 40. Conditions toincrease growth and social development: ◦ ECB should act more agressively in order to tackle low inflation, euro appreciation and debt burden: QE. ◦ Growth friendly tax reform. ◦ Public expenditure to be focused on child poverty. ◦ Increase the quantity and effectiveness of R+D investment. Reform of universities. ◦ Bold policies towards qualification of not-qualified workers and unemployed. ◦ Bring people back to the employment as soon as possible. Specially those in long term unemployment.