The Governor of the Bank of Spain, Pablo Hernández de Cos, has advocated reaching an agreement on business margins, after the wage pact between employers and unions, with the aim of avoiding the inflationary spiral and second-round effects. which would motivate additional actions by the ECB.

Asked at the IV International Forum on ‘Expansion’ about the pact reached by employers and unions to raise wages by at least 10% until 2025, the governor stressed that it is a “very important” agreement due to the message of trust and stability that transmits In addition, he has also emphasized that this salary agreement limits the “growing” risk that there was until now of second-round effects on inflation, although he has affirmed that another agreement “has to be produced” regarding business margins if they want to “avoid” the inflationary spiral.

Regarding housing, De Cos recalled that in the Annual Report of the Bank of Spain, also published this week, it is stated that rental problems are supply problems. In this way, the income controls proposed by the new law may cause supply reductions in the long term.

“You have to evaluate in real time what the effects of the law are so as not to end up with a worse result than what we wanted to resolve,” said the central banker. Likewise, De Cos has also been asked about the sustainability of the pension system, which is another topic covered in the Bank of Spain Annual Report.

The governor has stressed that the consensus of analysts considers that the reforms on the income side for pensions cover a part “but not all” of the extra spending that has been generated in the long term by the indexation to inflation and the repeal of the sustainability factor.

However, it has also positively assessed the inclusion of an automatic adjustment mechanism on the contribution side in the event of a deviation in Social Security spending.

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