Finally, and despite all the reluctance, Jose Luis Escrivá will be appointed as the new governor of the Bank of Spain, three months after the departure of Pablo Hernández de Cos. The current Minister of Digital Transformation and Civil Service arrives at the regulator with several challenges on the horizon. The most important, that of maintain its prestige and independence of a key institution for economic policy.
The legacy of Pablo Hernández de Cos is one of the most remarkable in the recent history of the Bank of Spain. During his term, the institution consolidated itself as a a reference of rigor and transparencyalways defending its independence against political pressures. José Luis Escriva Belmonte (Albacete, 1960), who came directly from the government, must demonstrate that he can live up to this legacy.
THE independence of the regulator This is essential for his credibility and the former minister will have to navigate a complex political environment, changing responsibilities overnight. Ultimately, it is necessary to avoid falling into the lack of vision that characterized MAFO’s time at the head of the Bank of Spain.
Furthermore, during the last legislature, José Luis Escriva had several disagreements with the supervisorparticularly regarding the sustainability of the public pension system. The differences emerged when the agency’s studies indicated the need to reforms that contradicted the Executive’s proposalswhich led the minister to publicly criticize these analyses.
In May 2022, Escriva described the Bank of Spain reports as lacking “sophistication” and without “new elements”, which has generated tensions with the institution. Now, as the new governor, Escriva must reconcile these differences and maintain the independence and prestige of the Bank of Spain.
Pensions and the labor market
Another crucial challenge will be evaluation of the economic policies of the Executivewith a particular focus on pension reform. As a former Minister of Social Security, Escriva knows first-hand the challenges facing the pension system, whose financial balance is increasingly difficult to maintain due to the aging of the population.
The sustainability of the system is an issue that raises concerns among both citizens and financial markets. Escriva must ensure that the Bank of Spain continues to be a critical and objective voice in the pension debateas has happened in recent years, despite being the author of the aforementioned reform. The regulator will have to continue to issue recommendations to strengthen the system, although this could ultimately constitute a modification of its previous work.
Yolanda Díaz and José Luis Escrivá.
Europe Press
Related to the above is the labor market analysisone of the tasks of the Bank of Spain. Escriva was a member of the executive responsible for a major labor reform. At a conference, he answered a phone call from Yolanda Díaz and said: “Yolanda, I’m explaining our reform.” Now he will have to judge independently the effects of this legislative change.
All this in a complicated environment, with unemployment still exceeding 11% and this is even more pronounced among young people. In addition, he will be in charge of leading the assessment of productivity, a key measure for wealth and growth that is not doing well in Spain.
Bank rates and interest rates
In addition, Escriva will have to face the challenge of maintain the stability of the financial system in a context of possible mergers, such as the one resulting from the takeover bid that BBVA is considering for Sabadell. Effective supervision and the guarantee that these operations do not negatively affect competition and the stability of the sector will be essential for their management. But there, it will have to work hand in hand with the European Central Bank.
The same thing happens with inflation and monetary policy management in an environment of still high interest rates. Although the European Central Bank leads monetary policy, the Bank of Spain plays its role as European regulator and Escriva will take sides in the ECB’s decisions. Likewise, he must anticipate the impact of these measures on the Spanish economy, particularly on debt and economic recovery.
The Minister of Economy, Commerce and Enterprise, Carlos Body (i) and the Minister of Digital Transformation and Public Service, José Luis Escriva (d).
Europe Press
Likewise, he will have to face the process of digitalization of the financial systemalready underway, but yet to be completed. The former minister will have to balance promoting innovation with the need to protect system stability and consumer safety.
On the other hand, although partly related, Escriva arrives at the Bank of Spain with the Housing as one of the country’s main problems. This is what the regulator stated in its latest annual report, in which it dedicated an entire chapter to the subject. Access to housing has become a real challenge for a large part of the population. The people of Albacete must therefore consider how monetary and regulatory policies can help alleviate this crisis.
tax system
In its analyses, the Bank of Spain has also taken charge of evaluating the Executive’s decisions in tax matters. One of its most recurrent criticisms has been Government Decision Not to Reduce Personal Income Tax Rates. Thus, the increase in wages linked to the inflationary process has also resulted in an increase in taxes paid by citizens.
Escriva inherits the challenge of stay critical and maintain an independent position regarding the government’s fiscal policies, since the Bank of Spain’s ability to objectively assess fiscal measures is essential to ensure a fair and efficient tax system.
