The report presented by Íñigo Fernández de Mesa, President of the IEE, and Gregorio Izquierdo, General Director of said institution, under the title 'An orthodox economic policy to reverse the slowdown and reduce uncertainty', indicates that the world economy is suffering a slowdown in the last semesters.

Spain will continue to grow in 2020 above the Eurozone average (1.2%), and most of the forecasts for 2021 assume that, despite the weakening of both national demand and the contribution of external demand, The Spanish economy will also grow more than the Eurozone. These relatively optimistic forecasts foresee, however, that the current differential will gradually disappear in the coming years.

The macroeconomic forecasts of the IEE for Spain are 2% in 2019, and half a percentage point less for 2020. The situation of economic worsening will be noticeable both in the evolution of family consumption and investment and in business exports . In line with the weakening of the activity, the pace of job creation in the private sector and the reduction of the unemployment rate are also slowed down, and the current account balance and labor productivity worsen.

Even so, our macroeconomic scenario is based on the maintenance of an orthodox economic policy, since, if some of the reforms that have been so successful have been reversed, or corporate taxes are raised, next year's growth can be significantly worse than the one raised in this report.

The IEE points out that the growth of public spending should be moderated, accompanied by fiscal system reforms aimed at boosting investment and business competitiveness. This is the most appropriate course of action to curb and reverse the slowdown in economic activity and boost job creation. In particular, it would be desirable to reduce corporate taxation, and especially reduce social contributions to employers, a tax that raises the labor cost, reduces employment and reduces the competitiveness of our exporting companies. At the present juncture it is especially wrong to raise direct tax pressure on societies and families, or create a new tax on financial activities (‘Tobin’ rate), which at best will reduce investment and job creation.

The current high level of public debt, 98.9% of GDP, puts us in a very exposed situation, either because the economy continues to slow down, or because the cost of refinancing the debt rises. There is no doubt that the high unemployment rate and the high public deficit are the two most serious structural imbalances in the Spanish economy. It is a priority and urgent to end the public deficit as soon as possible and to transfer to the markets the message that Spain abandons the practice of financing public spending by incurring deficits.

To all this is added the high political instability that generates a remarkable uncertainty about the future course of our economy. The next Government should take advantage of the expansionary orientation of monetary policy to implement a policy that achieves budgetary stability without raising taxes and through spending, until balancing public accounts, before a change in trend occurs. The Government should thoroughly review budget items to eliminate all unproductive expenditures, moderate the growth of current spending, implement reforms that will increase the productivity of public services and, in general, improve the efficiency of public spending, which is the great pending reform of our economy.

Likewise, we must bear in mind the concern about a new recession, which has opened a debate on the role that monetary and fiscal policies should play at this delicate juncture, and on the relevance of facing structural reforms to raise potential growth to medium long term.

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