Economy.- Navarrete (Treasure) believes that the eurozone has lost the opportunity to make reforms in a positive environment

 Economy.- Navarrete (Treasure) believes that the eurozone has lost the opportunity to make reforms in a positive environment

The general secretary of the Public Treasury and Financial Policy, Fernando Navarrete, has criticized that since 2014 there have been no changes in the European structure taking advantage of the economic momentum, ensuring that the euro zone has lost the opportunity to work in a positive environment.

This is what Navarrete said, who took over his current position last April, during his speech at the high-level seminar organized by the Bank of Spain under the title ‘Strengthening the governance of the euro area: short-term challenges and a long-term vision ‘, in which three other relevant personalities have also participated in the world of finance in the international sphere.

“The main changes in the European structure stopped in 2014, so basically we have skipped the whole positive environment when making reforms and, therefore, we have lost the opportunity to work in a positive environment.” The approach has not been balanced “, has asserted the main responsible of the Spanish Treasury.

Likewise, Navarrete pointed out that the euro zone is in a situation that could be called ‘the roadmap trap’, always trying to see what will happen without having a clear vision of the final result. “Having a clear vision of the final result can be an aid to know where we want to go.” The idea of ​​the Spanish government is to give practical solutions, agreements, to advance the debate, “he explained.

For Navarrete, it is very necessary to implement a better safety net and reduce the risks of financial fragmentation, since in his opinion it seems to have forgotten what this can mean for the markets: the lack of confidence. “This element of the equation when evaluating financial assets is essential not to distort,” he said.

Likewise, he has defended the need to finalize the process of banking union, since the extra cost for citizens that has meant not having completed it during the crisis can not be underestimated. “This makes citizens lose faith or attraction to the common project,” Navarrete warned, noting that the current framework is “incomplete” and “unstable” from the political point of view.

As he explained, the current framework on banking resolutions implies that decisions on liquidations are taken at a European level, although the failure of them has consequences at the national level. Navarrete has said that a way must be found to align decision making with the financial consequences of potential errors.

In this regard, he pointed out that for there to be greater coordination and to treat the banking union as a single jurisdiction that serves as a “backstop” or firewall that can avoid shocks, national regulatory obstacles must be eliminated. However, he has admitted that there can always be a shock enough negative to exceed all the shock absorbers. “Stabilization capacity and the financial safety net come into play here,” he added.




In this way, Navarrete has called for a correct balance between the banking union and the stabilization capacity, including also countercyclical policies, the non-existence of permanent transfers but rather as temporary support or clear eligibility criteria. He also believes that a reform of the European Stability Mechanism (ESM) is needed, that it supports the banking union, serves as a backstop for the Single Resolution Fund (FUR) and provides financial assistance to member states with poor access to markets or subject to conditionality.

Regarding the idea of ​​reducing risks and sharing them, Navarrete has indicated that it is a controversial measure, since not all countries are willing to share certain types of risks, a context in which the inheritance problems come into play. of legacy, NPLs or doubtful loans.

“From an economic perspective, what we need most is to share the economic risks, this has not been sufficiently developed compared to the United States (…) The more we share the risks, the less necessary it will be to work through fiscal channels,” he said. in this sense the general director of the European Stability Mechanism (ESM), Klaus Rengling, one of the three other panelists invited to the seminar.





For his part, the head of Economy, general director of Fiscal Policy and International Monetary and Financial Policy of the Ministry of Finance of Germany, Ludger Schuknecht, has assured that in his country there is a problem of confidence with respect to the existing European framework. “It is assumed that institutions should work well, but there are shortcomings,” he added. This situation causes many, especially the countries of the North, to be skeptical when it comes to increasing risk sharing.

“Should all of Europe pay for structural problems of the banking sector as it happened with the case of the crisis of the savings banks in Spain?”, Said the German economist, explaining that it is good to have a clear commitment but without becoming a source of opportunism where each country presents its demands.

According to Schuknecht, the 2008 crisis was an endogenous ‘shock’, although a certain lack of confidence was inherited from the United States. “We must take into account the large dimension of the euro zone, it seems logical that small and more vulnerable countries are in favor of greater risk sharing, but the largest countries feel that they should be concerned and move forward the whole “, has explained.

On the other hand, Ashok Vir Bathia, of the European Department of the International Monetary Fund (IMF), has indicated that there is a “limited” consensus on the future of the structure of the Economic and Monetary Union (EMU). However, the body chaired by Christine Lagarde believes that consensus can be achieved and asks that the challenges and the resistance of interests not be underestimated. “Steps are needed for greater harmonization and that failed banks are managed in a framework that allows reducing costs to the economy, the rest of the sector and taxpayers,” he said.