Don’t panic

Spain’s new government is starting to formulate its economic policy and on 20 July, El Mundo reported on a key element: the decision to raise the state spending cap for 2019 by 4.4%, the biggest increase for five years, and to soften deficit reduction targets  (El Gobierno eleva el gasto del Estado un 4,4% hasta llegar a 125.064 millones, la mayor subida desde 2014). Treasury minister María Jesús Montero is quoted as arguing that the rise will allow the government more headroom to promote growth and increase social spending, and will comply with Eurozone budget control rules. The article predicts, however, that new ministers will have to tread carefully to get the new approach through the Spanish parliament, given that the upper house is still controlled by the conservative Partido Popular, while on the left the Podemos party has been calling for a much higher spending increase.

The government’s approach reflects its more upbeat assessment of Spain’s economic prospects: according to the article, economy minister Nadia Calviño is predicting that unemployment will fall to 13.4% by the end of 2019, and to 10.7% by 2021.

Some of this optimism is on view in a piece in ABC on 13 July about business diversification and innovation in the Spanish banking sector (Los «nuevos» negocios de la banca: innovación tecnológica sin vajillas ni baterías de regalo). Despite the hype over the opening of a mobile phone shop in Mallorca by an offshoot of CaixaBank, journalist Carlos Manso Chicote argues that the real story is elsewhere as the big players like CaixaBank, Bankia, BBVA and Santander exploit mobile, digital and other technology to cut costs and develop niche markets; the challenge has been how to protect and extend their profits in the face of extended low interest rates. Experts interviewed for the article argue that the banks have learnt the lesson of the disastrous property boom and are now taking a much more balanced approach. Whatever CaixaBank has been doing seems to be working: La Vanguardia reported at the end of July that its half-year profits had jumped by 54% to €1.298 bn (CaixaBank gana 1.298 millones en el primer semestre, un 54% más).

And in El País, economist Luis Garicano has been looking at the potential impact of AI on jobs  (¿Cómo afectará la inteligencia artificial al nivel de empleo?). Recent research in the US, he argues, points to the positive lessons that we can draw from the past, especially the industrial revolution, where mechanization in agriculture, the textile industry and other sectors produced massive improvements in productivity, wealth and new economic activity which ultimately far outweighed the short-term displacement of jobs. The main risk, he thinks, is from new technology which is just enough of an improvement to knock out human jobs without generating enough of a boost to the broader economy to compensate. His conclusion: we can be positive about the future but need to be prepared for a period of rapid change and ensure that people can acquire new skills.


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