Spanish minister Calviño says election uncertainty won't hit economy

Spanish economy minister Nadia Calviño said the country’s economy would not be negatively impacted by the uncertainty around the upcoming general elections, predicting that it would continue to grow faster than the euro-area average.

In remarks to Bloomberg on Tuesday, she conceded that the government’s 2.2% growth forecast for 2019 was down from 2.5% in 2018, but did not believe the electoral uncertainty would have a significant effect on the new projections.

Calvino claimed that Spain's political and financial stability were in fact improving, a trend she believed would continue following the elections, while pointing to the strong demand for the country's debt in the past few weeks to back up her arguments.

She also said Spain's Ministry of Economy was working around the clock to set-up its new macroprudential authority with the aim of having it in place before the political break ahead of the vote scheduled for 28 April.

Her hope is that the new body, a forum made up of regulators and supervisors, will contribute to the prevention of future crises.

“I hope we can take action this week to finalise the project to create a macroprudential authority,” she said.

Calviño also told Bloomberg that Spain needs to do more to tackle challenges including a lack of innovation, inequality, restoring trust in the financial sector and enhancing protections for consumers.

The minister also reminded her audience of her government's commitment to “continuing to reduce the deficit despite not having the General Budget approved."

The current administration in Madrid decided just month to bring forward the national elections after opposition parties, including its heretofor nationalist allies not to back its draft budget for 2019.

Prime Minister Pedro Sanchez and his ministers have also been the object of much criticism after ramping-up their promises of higher social spending ahead of the elections, including recently-approved increases in public pensions and for public sector wages, alongside a promise to dial-back on the prior government's labour market reforms.

In that same vein, local reports on Tuesday criticised plans to convert a record number of part-time public sector contracts into generous full-time ones.

Aside from the loss of competitiveness and the deterioration in the central government's finances that will result, some observers believe such policies might also leave the country worryingly vulnerable in the case of any future downturn, thus repeating the mistakes of the past.