José Manuel González-Páramo: “We need measures capable of bolstering productivity in Spain”

BBVA’s Executive Board Director divided into three parts his speech entitled Tendencias que configuran un nuevo mundo: el futuro de Europa (Trends Shaping a New World: the Future of Europe). First, he analyzed the situation of the global economy. Then, he discussed some of the challenges that Europe faces, to conclude shining the spotlight on Spain's situation.

A Complex Global Scenario

Starting with the global context, José Manuel González-Páramo pointed out that we are at a new stage of slow economic growth, with both developed and emerging markets growing at moderate paces.  Also, in his opinion, the world’s population is ageing, especially in developed countries. And all this is taking place in an environment of low productivity that, in his opinion, can only be boosted through technological innovation and the enhancement of human capital.

In this regard, he reminded that it is necessary to leverage the opportunities afforded by the Fourth Industrial Revolution, especially in three key aspects: global interconnectedness, the information economy and the age of automation.  Another point that BBVA’s Executive Board Director deems pivotal within the context of a Fourth Industrial Revolution is the millennial generation.  This “digital” generation represents the force of disruption that will drive the disruption that will sweep across many sectors in coming years, and will bring the change that is being observed in the behavioral and consumption patterns of a whole generation, in his opinion.

Europe: brittle recovery and political problems

Regarding Europe, José Manuel González-Páramo considers that the scenario of the crisis can also be leveraged as an opportunity. BBVA's Executive Board Director recognized that Europe is currently in the midst of a brittle recovery processes, hindered by a number of political issues.

Specifically, he pointed out three risks that the Old Continent is facing. On the one hand, the anti-establishment movements, such as the one evidenced by the Wallonia parliament’s refusal to sign the commercial treaty between the European Union and Canada. To this respect, José Manuel González-Páramo – who is also EU Chair of the TransAtlantic Business Dialogue (TABD) - stressed the importance of raising awareness about the benefits of these trade agreements.

Then, he went over the social and economic consequences of the United Kingdom’s eventual departure from the European Union. Finally, he pointed out that the refugee crisis has bolstered euroscepticism in all European countries.

Towards a Stronger Europe

To face all these challenges, González-Páramo only sees one solution: more Europe. From his point of view, “either we unite, or there will be no more Europe” and, to walk in this direction, he proposed two priority lines of action.

From an institutional point of view, finalizing the union and the capital markets union, progressing towards a fiscal union and in environment of the digital single market, together with walking toward a “two-speed” Europe, with different levels of integration during a limited period of time that will allow making headway toward a more integrated and solidary European Union.

From an economic perspective, European priorities should focus, in his view, on achieving inclusive growth that curbs inequality and poverty. In this line BBVA’s Executive Board Director stated that monetary policies alone are not enough to speed up growth and called for other tools, from structural reforms to more adequate fiscal policies.

To preserve and promote the European project, he stressed, EU countries should face these challenges combining their efforts.

The Case of Spain

In this context, José Manuel González-Páramo made a special mention to Spain and the reforms that the country still has to tackle. In his opinion, Spain’s economic recovery has been bolstered in recent years by certain tailwind factors, whose impact is dwindling progressively. Such is the case of the ultraexpansive monetary policy, an exchange rate that bolsters exports, low oil prices and a less strict fiscal policy.

However, in his view, Spain needs to curb some of the notable imbalances that have built up in recent years, and, especially, lay the foundations required to ensure growth in employment and productivity without going back to pre-crisis patterns.

For this purpose, BBVA’s Executive Board Director requested the adoption of reforms in three fronts in our country. The first, reforms that guarantee the access of the real economy to financing at low interest rates. Second, measures capable of significantly reducing unemployment rates and temporality, while increasing the participation in the job market.  In third place, it is essential to boost productivity by improving the human capital to achieve an inclusive growth. In this line, BBVA Research points out in its Spain Outlook report, published this week, that it is essential to define an “agenda aimed at reducing structural unemployment, temporality and increase productivity.”

Finally, José Manuel González-Páramo, which was a member of the Executive Committee and of the Governing Board of the European Central Bank (BCE) between 2004 and 2012, urged the new government to make an effort to increase Spain's influence in EU institutions.

Alumni of the San Telmo Institute in Seville gather every five years to take part in the Assembly of the Member Association, to produce an in-depth analysis of the most prominent trends affecting the economic society. BBVA’s Executive Board Director participated in representation of the institution, which also sponsors the event, and was joined by relevant figures of the business and financial world.