The governor of the Bank of Spain, Pablo Hernández de Cos, is in favor of the Spanish Government and those of the euro zone withdrawing the exceptional aid introduced after the invasion of Ukraine to alleviate the rise in energy prices. In the Spanish case, they include a temporary reduction in taxes applied to gas and electricity.
“As energy prices fall, governments must withdraw their energy support measures,” De Cos said at the sovereign wealth fund forum being held today in Madrid, the International Forum of Sovereign Wealth Funds.
However, the governor has not specified the date on which the aid should end. The Government promised that some of them, including the VAT reduction on electricity and gas, would be without effect as of January and for the moment has not reported otherwise.
The Bank of Spain works with an inflation forecast for next year of 4.3%, seven tenths more than in its previous forecast, in which it discounts that the Government will withdraw the measures approved two years ago to cushion the effects of rising prices. of energy.
“If a new energy crisis requires new fiscal support measures,” said De Cos, “they should be much more specific.” They should be accompanied by “structural reforms to strengthen the supply side.”
The Bank of Spain also calls for “fiscal policy to be restrictive in the euro zone in 2024”, in line with the messages of the Eurogroup at its July meeting. Next year, unless decided otherwise, EU countries must return to spending rules as before the pandemic.
For De Cos, the ECB’s new slogan of maintaining interest rates at 4.5% for a long time so that inflation falls to 2% is being well received. “The markets are understanding it well,” which can be seen in areas such as investment prospects, she said.
“The investment is a reflection of the market’s conviction that inflation will continue to fall” and that “the markets believe what we say,” he assured. One of the unknowns that now worries the ECB the most is the way in which rate increases are passed on to the economy as a whole.
