Spain’s central bank warns political instability could hurt economy


The head of SPAIN’s central bank has warned that political instability could have a negative impact on the country’s economic recovery.

Pablo Hernández de Cos said Spain’s leftist government must stick to labor reform and stay focused in order to fix the economy after the pandemic.

“In Spain we are experiencing a process of political fragmentation that we are not used to, and it is important that we can deal with this situation and that it does not prevent us from reaching agreements on reforms,” ​​said Mr. Hernández de Cos at an event. held in Madrid by the Europa Press news agency on Monday.

The bank’s chief, who is also a member of the Governing Council of the European Central Bank, has previously welcomed the labor market reform imposed by the previous centre-right government in 2012.

He believes ‘capital buffers’ have helped reduce costs after the financial crisis and wants to see similar support put in place to help pull Spain out of the financial losses caused by the pandemic.

Currently, there are tensions between Spanish political parties over whether employees should be fired due to absenteeism caused by illness.

Currently, the Socialists and the radical left Podemos party, which formed the government last month, are at loggerheads with right-wing parties that are boosting outsourcing. workers

Left-wing parties also want to ensure that workers do not lose their jobs if they are absent due to illness and are calling for priority to be given to company-specific negotiations rather than the whole sector.

Mr Hernández de Cos argued that it would be better to focus on issues such as reducing the high proportion of people on temporary contracts — more than a quarter of the workforce, one of the the highest levels in the euro zone — and the repression of unemployment, now around 14%.

In any case, he assured that the banking sector has shown “remarkable” resilience, supported by improvements both in the quality of its balance sheet and its solvency over the past decade and by the strength of economic policies. applied since the beginning of the crisis.

“The crisis has only underscored the importance of having a healthy banking sector, with sufficient reserves to absorb unexpected risks. We must ensure that the resistance of the sector is maintained in the face of the new risks that are emerging”, Hernández de Cos.

He also revealed that the European Union’s agreement to disburse bailout funds to member countries financed by common debt is compatible with EU treaties.

“I have no doubt that the Europe agreement is fully compatible with the Treaty,” said de Cos.

EU governments have agreed to allow the European Commission to raise up to €750 billion in capital markets and channel the money to member states worst hit by the pandemic through linked payments to jointly agreed reform and investment plans, partly in the form of grants and partly in the form of loans.

The European Commission said on Friday it was confident the contested decision would stand in the German court.

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