BarcelonaThe latest published inflation data has just loaded arguments to those who think that the European Central Bank should end interest rates at 0% once and for all. In Spain, for example, prices slowed in April (from 9.8% to 8.4%), but there is a worrying detail. Underlying inflation – which excludes energy and food – rose from 3.4% to 4.4%.
The translation of this is that exactly what many economists and institutions feared is happening: energy prices are infecting the rest of the economy. If in March two-thirds of the rise in inflation was due to light and food, in April this proportion had dropped to 48%. Something similar happened in the eurozone as a whole: energy and food went from 57% of the rise to 48%.
This is important because the ECB could do little with its policies to bring down energy prices. However, if the contagion is more widespread, a bank intervention could have an effect on prices.
The danger of a self-inflicted recession
The risk is that an intervention to curb prices will cause a recession (economic downturn for two quarters). In 2011 it happened: the ECB considered that the financial crisis had fallen behind and began to rise in interest rates, which led to a recession in Europe. “We don’t want to repeat that mistake,” said sources close to the ECB, who believe that this is why the institution is leading the way and more slowly than the United States or the United Kingdom, where rates have already begun to rise. increase.
The ECB has been pursuing stimulus policies for a decade to get the European economy out of the pit. One of these policies is the lowering of interest rates, but another (which has been in place since 2014) is the mass purchase of public and private debt.
What will this turn in monetary policy mean for citizens? Among other things, these will be the consequences:
- Rising mortgages at variable rates. Faced with the expectation that rates will rise, in recent weeks the Euribor (the benchmark for most mortgages) has risen sharply and, in fact, closed April positive for the first time since of six years. When the ECB raises rates, it should go up even more. Anyone who has taken out a variable rate mortgage will notice it instantly, but all the credit will become more expensive, including fixed rate mortgages (which are already going up). Whoever thinks they will need to apply for a loan or mortgage, the sooner the better.
- More reward for keeping the money in the bank. In recent years we have seen how having the money in a deposit not only did not give any remuneration but, in a thousand different ways, the banks prevented it from being charged to us. This should end: when rates go up, those who go into debt are penalized but those who save are rewarded. Banks should start repaying deposits.
- More difficulties in financing public spending. It may have gone unnoticed, but the ECB has already said that debt purchases will end in the third quarter of this year. “This can cause problems in countries where we have become addicted to debt,” said Professor Joan Tugores. “Either we reduce debt issues or we could have trouble placing it,” he added. This economist maintains that for Spain (which closed last year with a deficit of 6.8%, well above what is considered healthy) the end of debt purchases will be “the thing you will notice the most.”
Protagonists
Barcelona is a small city, to the point that two possible rivals in the municipal elections that will take place in a year’s time can coincide in the same lunch. This is what happened last Monday when Elsa Artadi (Junts candidate) and Sandro Rosell (who is considering running) took part in a lunch to learn about Rosa Cañadas’ candidacy for the presidency of the Cercle d’Economia. It is not known that they greeted each other.
Maurici Lucena became chairman of Aena just six weeks after the PSOE came to power in 2018. Aena is the largest shareholder in Spain and is often an extension of the executive: it was the government (and not Aena) who announced that the extension of El Prat airport was being withdrawn. That is why it seems incredible that Aena has taken the government to court because it denies it the right to receive compensation for forced closure during the pandemic. But that’s right: the case is already in the Supreme Court.
If there’s one thing Jaume Gomà, the founder and first shareholder of Ulabox, has shown, it’s resilience. This high-end online supermarket was born in 2010 and has spent a decade in losses: in 2020 it had a turnover of 9 million and lost 3. The sector has been taking its demise for years. In the end, it was: it was acquired by the Czech Rohlik (the debt of the start-up Catalan), which will be called Sezamo. Gomà will continue as chief executive.
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