“The economy is going like a motorcycle.” This is how the Prime Minister, Pedro Sánchez, has defined the current economic situation. He is not without reason. This is endorsed by the OECD, which has raised this year’s growth for Spain to 2.1%. So much so that the organization considers it “the locomotive of the EU”. But the question is who is the economy doing well for and the answer cannot be other than for companies, whose profits “are going like a motorcycle”.
It is logical that the recovery initially benefits companies. It is not for nothing that there is an old saying that says that today’s benefits are tomorrow’s investments and the day after tomorrow’s employment. Wages are the last to benefit from the arrival of an expansive cycle. The data so far indicates this: in the last two years the purchasing power of wages has fallen by close to 10%. Said in Roman paladino. The middle class is still suffering from the sharp increase in inflation caused by the war in Ukraine.
The surprising thing is that not all countries have been like this. In Poland, for example, the purchasing power of wages has increased by more than 7%, in Germany by more than 1%. Only in half a dozen countries like Spain, Portugal, the Czech Republic and Denmark do workers live worse.
In Spain, wages have been practically frozen. With such high inflation rates, their purchasing power has been severely punished. This decrease has been aggravated by the rise in the cold tax pressure that has occurred as a result of not having deflated taxes, as would have been the logical thing to do.
But the good news is that this sacrifice of the workers has had its reward. Companies have managed to increase their profits by moderating labor costs, which has allowed them to invest and create jobs. In the last year the number of unemployed has been reduced by nearly half a million people and the number of Social Security contributors has increased.
The economic vice president, Nadia Calviño, is confident that to the extent that the Consumer Price Index (CPI) continues to drop and ends the year at rates close to 3%, thanks to the aid for certain consumptions, the purchasing power of workers, or at least it will not deteriorate. It must be borne in mind that the salary agreement signed between the unions and the employer contemplates increases that oscillate between 3% and 4% for the next three years. Although until this materializes, the effects of inflation on the middle class will continue to be lethal.
It should not be forgotten that the shopping cart continues at rates above 7% per year. To this we must add that the rise in interest rates is making things very complicated for those who have a mortgage to pay. And there are still at least three additional hikes to come in the coming months.
This partly explains that although the economy is going “like a motorcycle” it is not being translated into votes. It is one thing for the economic data –GDP growth, inflation and employment– to go well. And quite another is that the structural data – deficit and public debt, productivity – continue to go wrong. It has always been like this. The situation is going well, but the absence of structural reforms makes growth unsustainable.
Another element of concern is that the euro area has fallen into recession and Germany, which is its true locomotive, will enter the dreaded stagflation – a drop in growth with high inflation rates – in the coming quarters. It does not seem very realistic that the Spanish economy will continue going like a motorcycle during the next legislature.
