The Secretary of State for Economy and Business Support, Gonzalo García, was kind enough to give a talk for Investment Strategies. In it, he spoke about the Next Generation Funds received and their degree of execution, predicting that they will pay the necessary conditions so that future generations have a more solid and sustainable economic environment. But, in addition, he predicted that by the end of the year inflation will have corrected its recent rises, as well as that the European Central Bank (ECB) will not tighten its policy. It will neither raise rates nor excessively restrict public and private debt purchase programs.
This is good news, if nothing else is new, since this is the great concern of the capital markets. To a higher degree than Covid, even.
In the US, for example, both the Dow Jones and the Nasdaq suffer a very severe correction, excessive, if you take into account business results, which continue to be good. Despite having the biggest and best companies in the world, the US fears a monetary tightening, which analysts are announcing as imminent, and which could awaken investors from the current world in which they live, with zero or negative interest rates and all the precise monetary stimuli.
It is already known that if the markets hate something, it is uncertainty. Going back to an old economic model, without the indefinite support of the central banks, opens the door to an unprecedented scenario in 10 years. Will it be necessary to return to monetary orthodoxy again, for a country to maintain a rating; the control of the monetary mass, the control of the public debt…?
That would mean a structural change, in theory sound on paper, but about which there are many doubts about the ability of the economy to cope.
In Europe, Gonzalo García ruled out this possibility, which, among other things, could cause a debt crisis. García outlined a reasonably good outlook, with the Covid crisis over, debt and deficit reduction and some stability in energy prices. The Secretary of State ruled out the emergence of new crises.
leveraged on the Recovery and Resilience Plan, announces recovery and effects of European funds until 2025. Very much in the arm of the private sector, which he described as “accomplice” of development.