BarcelonaSo far, in Europe, the measures agreed to deal with the economic impact of the war have been celebrated with some cofoism. We are not used to decisions being made so quickly and uniformly, nor are they so forceful. But the conflict will end up putting us all to the test.
The increase in the price of energy and various raw materials will affect our production and consumption capacity. He’s already doing it, obviously. Let’s be clear: the European population as a whole has become impoverished. Because we are big importers of these goods, and now they are more expensive, we can spend less on other things. Not only that. The price of these products has a very different impact depending on the economic sector, or the level of income of each.
Once again, economic policy is once again key to dealing with an extremely complex situation. In the last two crises, monetary policy has played a very important role. Interest rates have been lowered to negative territory, and dojo assets have been bought in the financial markets.
But this time monetary policy cannot and should not be the main instrument for dealing with the crisis that is unfolding. It cannot because the room for maneuver is very limited. Interest rates are already at very low levels. Nor can it because high inflation forces central banks to act with the utmost caution. Any move that calls into question its commitment to price stability could end up making the inflationary shock more difficult and costly to control.
In addition, monetary policy is not the right tool to fight economic crises that affect different groups and sectors unequally. And this is, above all, an asymmetric crisis. The prominence must be taken by fiscal policy, which, in addition to trying to stop the coup, must try to distribute the clash as evenly as possible among the population. The range of measures that can be taken in this regard is very wide, and includes the modification of tax rates, direct aid to the most affected sectors and groups and an income pact that distributes as well as possible the costs of this. crisis between workers and companies. The bulk of the measures announced by the Spanish Government go in this direction, they are limited in time and some of them are aimed at the most affected groups and sectors.
The consequences of not having monetary policy are no less. Central banks, because they have a very well-defined goal, and because they are independent institutions, have acted with agility and forcefulness when necessary. This time, it will have to be the fiscal policy that acts with agility and forcefulness. Depending on how the crisis evolves, the wide range of measures that are being implemented will have to be adapted. Learning will be constant and therefore patience will be required. Generosity will also be needed. With some measures, those from an ideological position will feel more comfortable, and with others, others. And to act with agility, constant negotiation and the achievement of great agreements will be necessary. Quite a challenge given the high polarization that prevails in most European countries. At its core, the economy will test liberal democracy. We must once again show that, in addition to reflecting the plurality of our society, this is also a mechanism that facilitates the achievement of comprehensive, rapid and effective agreements.
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Anfac (February)
Euro zone CPI
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Eurostat (March)
Brent oil barrel price
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Economist