Fiscal policy latest publications
At its meeting last Thursday, the European Central Bank (ECB) launched a comprehensive package of easing measures, as Draghi had—for all intents and purposes—been signaling over recent months (in his speech at Sintra and, most significantly, at July's monetary policy meeting).
One of the most hotly debated political issues during the last elections was the margin that Spain has for raising and lowering taxes.
Last week, the annual economic policy symposium was held in Jackson Hole. This year's theme was the challenges for monetary policy. Although fiscal policy was not the subject of debate, it cast a shadow over the event.
Despite the reduced fiscal space, we consider it desirable to boost private consumption and, by the same token, aggregate demand by reducing the target for the 2019 primary balance to 0.5% of GDP.
Faced with a 0.1% GDP contraction in the second quarter and the possibility of a third-quarter repeat—as raised recently by the Bundesbank—there is speculation that the German government may approve a stimulus package of up to EUR 50 billion (1.5% of GDP).
Considering the current circumstances of almost zero economic growth, there is no need to aim for a primary surplus similar to the one planned for this year (1% of GDP) in 2020. If properly reported, a smaller primary surplus may be welcomed by the markets.
Budget implementation in April 2019 slightly worsens the dynamics of 2018. During the 2019-2020 period, and in no policy change scenario, the pace of adjustment of the public deficit would be moderating compared to that observed in previous years
Recent weeks have seen an escalation of restrictive measures and trade retaliation between the US and China, as well as restrictions placed on the activity and investment of foreign technology companies in domestic markets or the announcement of further tariffs imposed by the US to Mexico.