José Manuel González-Páramo: “The Spanish economy started 2016 showing positive signs despite uncertainties”

During his address, titled The Global and Spanish Economic Situation, José Manuel González-Páramo explained how consumption, investments and dynamism in the export sector are driving growth in the Spanish economy. He underscored how international factors such as low oil prices, expansive monetary policies and the change from a neutral to an expansive fiscal policy in Europe where contributing to build the positive momentum.

According to his calculations, the decline in oil prices should have a positive impact on Spanish economy of a bit over 1% in terms of GDP growth in 2016, and of 1.5% in 2017. On the other hand, González-Páramo warned that the increasing political uncertainty may have already detracted between 0.2% and 0.3% from the GDP's growth rate. According to his estimates, if the uncertainty continues another 6 months or more, the GDP adjustment could reach 0.5% in 2016 and 1.3% in 2017.

Talking about the international scenario, José Manuel González-Páramo said expects the global economy to continue growing, but at a slower pace than last year - and with more risk -  specifically 3.2% in 2016 and 3.5 in 2017. The main risks the global economy faces are economic stagnation in the US, additional adjustments in emerging countries, a rough landing of the Chinese economy and tensions in the markets.

BBVA’s Executive Director explained that these tensions in financial markets are a result of the slower than expected increase in interest rates by the Federal Reserve, and some surprisingly negative economic data in recent times, such as China’s.  As regards adjustments in oil prices, González-Páramo stressed that “lower prices will be good, although not for everyone.”

As regards European integration level, global risks add to domestic ones. González-Páramo singled out three risks as the most relevant: On the one hand, the possibility of a Brexit, or the UK leaving the European Union, which would certainly cause this commercial channel and Europe’s project to weaken this commercial channel and the European project. On the other, immigration and the handling of the migratory inflow from Eastern countries. And, finally, the risks that still "Local” operating mode over peripheral countries - such as Greece - regarding the implementation of reforms and the rise of populist movements.

To solve these issues, José Manuel González-Páramo proposed higher integration and solidarity among EU-members, and more specifically, advocated the need for both completing the Banking Union and taking the first steps towards the fiscal and political union.

He also defended the road map that European authorities will be required to follow in the coming years. The document, unveiled in summer 2015 and titled Five President’s Report, outlines the steps that should be taken to continue with the European integration process. The plan intends to complete a genuine monetary union within the next 10 years, with a gradual two—stage approach. One until 2017, when the banking union will be completed with the rollout of the Eurozone’s single deposit guarantee scheme. And the second, from 2017 to 2025 that envisages the revision of the Treaties, progressing in a fiscal and political union.

Finally, José Manuel González-Páramo underscored that unique opportunity embodied in the Transatlantic Trade and Investment Partnership (TTIP) – currently  being negotiated by the US and the EU- represents for both blocks.. In the case of Spain, it offers a unique opportunity to diversify its export markets. Currently, the US is the largest market outside the EU for Spain’s exports, which are highly concentrated in Europe. The TTIP will also allow Basque Country companies to increase their exports to the US, the region’s third largest market after France and Germany.

* In the picture: José Manuel González-Páramo, BBVA Executive Director; and Marco Pineda, Elkargi general director