The agency emphasizes that packages of measures of this type must be temporary, and focused on the most vulnerable group. In addition, it warns of the effects that the Housing Law or the pension reform could have in the medium term.
He Bank of Spain has recommended to the Spanish government that the anti-crisis measures to deal with inflation be concentrated on the most vulnerable people and be withdrawn gradually. The supervisor believes, in fact, that the start of the fiscal consolidation process could take place this year.
“In the current environment of high inflation, it is crucial that the tone of fiscal policy is not incompatible with the tightening of our monetary policy”, stressed the Governor of the Bank of Spain, Pablo Hernández de Cos, in the ‘Annual Report 2022’ Posted this Wednesday.
The entity defends that such aid should be temporarybe very focused in the most most vulnerable people. In addition, he believes that incentives to consume less energy should be maintained.
Thus, it considers that measures such as the elimination or lowering of VAT on certain products, checks for families or certain aid to companies should be withdrawn gradually, in parallel with the already observed reduction in international prices.
The Bank of Spain considers that the package of measures deployed in 2022 and 2023 helped to sustain activity and contain inflation in 2022, and it is expected that they will also do so in 2023, although their withdrawal will drive up consumer prices in the coming years, especially in 2024. Specifically, the Bank of Spain estimates that the reversal of measures in 2023 will mean an increase in inflation in 2024 of 1.5 percentage points.
Adverse effects of the Housing Law
In addition, it has warned that some of the measures included in the future Law for the Right to Housing, such as rent control, could generate “unwanted” effects in the medium term and reduce the supply and quality of housing in rent.
He explains that the economic literature has indicated that, although price controls show the ability to reduce rental prices in the short term in regulated areas, this policy can generate adverse effects on the rental supply, as well as segmentation in the real estate market. .
Apart from the necessary boost to the public rental supply, the Bank of Spain maintains that the “considerable” current imbalance between supply and demand could also require decided support from the private rental supply.
pensions
Finally, Hernández de Cos has estimated that “it will be necessary” to adopt New measures to reinforce the financial sustainability of the pension system from 2025. He argues that after the pension reforms adopted since 2021, the system “will have to face higher spending obligations in the long run, which have not been fully offset on the revenue side.
To this we must add the “uncertainty” that the impact of the increases in contributions included in the pension reforms may have on employment, wages and competitiveness, for which reason Cos urges a “rigorous, continuous and transparent evaluation ” of the effects of these reforms, including their consequences on intergenerational equity.
Source: Eitb
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