José Luis Escrivá (Albacete, 64 years old) is an economist. At the end of June he will turn nine months as governor of the Bank of Spain. Before he was Minister of Digital Transformation, after occupying the Social Security portfolio in the governments of Pedro Sánchez. And first president of the Independent Fiscal Responsibility Authority (Airef), under Mariano Rajoy. In this interview, conducted on Thursday at the agency’s headquarters, analyzes world uncertainties, committed to the continuity of European monetary policy and highlights the competitive advantages of the Spanish economy. It also addresses the changes and tensions within the institution that now heads.

Ask. The decision to lower the types was quite automatic in the Governing Council of the European Central Bank (ECB) on Thursday. Continue down, will it require much more discussion?

Answer. Since I am part of the ECB, I perceive a great consensus on how to address monetary policy. I don’t see reasons that make this approach change. It is an approach based on a continuous evaluation of the data, and in which we do not commit ourselves in advance with any path for future interest rates. In any case, inflation is now around our goal of 2% in the medium term and expectations are anchored at that level. That gives us a certain peace of mind.

P. That is why will it cost more to follow the reduction path?

R. The scenario has been complicated since the arrival of Donald Trump to the US presidency. New risks appear. On the one hand, demand could weaken in this context of volatility of financial markets and uncertainty of financial agents. To this could join a decrease in energy prices and a stronger euro. All this could bring down inflation, especially in the short term. This could be reinforced by the effect of tariffs on external demand. On the contrary, a disruption of global commercial relations and an increase in defense and infrastructure spending could raise inflation in the medium term.

P. You arrived in Frankfurt with a restrictive approach to monetary policy. Some perceived him as someone far away from the pigeons.

R. I am neither Falcon nor Paloma. I form my criteria on the basis of an exhaustive analysis of all macropinancies, domestic or external dynamics. Fruit of that analysis, sometimes I can consider more appropriate than the tone of monetary policy is less restrictive, but on other occasions I have opined exactly the opposite. I am very comfortable with gradualism [actual]That is, accompanying the improvements in inflation with new successive cuts of 25 basic points in the types. And verify its effectiveness every time, with the most recent data in the hand, to consolidate that 2% inflation. When the situation is full of uncertainties, it is convenient to maintain all open options. The central scenario with which we operate – GDP growth around 1%, inflation of 2% – may require, if confirmed, if any, some fine adjustments.

P. A novelty is the appreciation of the dollar, 10% since the arrival of Trump.

R. In times of increasing uncertainty and global risk, the dollar has traditionally been refuge. Since April it is not being. There is less confidence in the dollar and that US assets are as safe as at other times. The domain of the dollar as an international reserve currency seems to touch a roof.

P. Christine Lagarde emphasizes that opens roads to the euro as exchange currency.

R. That’s how it is. The euro has potential to compete with the dollar, especially if it maintains its macroeconomic and institutional stability. With a solid economy and a commercial volume higher than that of the United States, Europe has a margin to reinforce the role of the euro as a reserve and reference currency in an international trade still dominated by the dollar.

P. For that, a common safe asset is required. The Eurobones are, but in limited amount and were issued only once, against pandemic.

R. It is true, although perhaps they are not the only determining factor. We also have assets such as the bund German and the sovereign bonds of the rest of the eurozone, which quote with relatively narrow differentials compared to it. The true imbalance with the United States lies on the scale of its financial market: it is deep, more liquid and broad than ours. Instead, our capital markets remain fragmented. We must move towards a true union of capital markets.

P. We have talked about it for years. Is a Big Bang required?

R. We need a clear calendar, with conditions and dates, for the introduction of all common elements, as was done for the introduction of the euro. From the ECB we insist on all European authorities with competitions, which are several. In the statement of the Governing Council on Thursday we returned to claim “an ambitious calendar” since there is currently no real program with binding commitments that show that all this will happen in predictable stages and dates set in advance.

P. There are 15 months left to apply the Next Generation program. And only half of the 740,000 million planned at the beginning has been spent. Does it provide for a failure, or a last minute acceleration?

R. The plan takes a fantastic leap from its same conception, since it allocates funds novel, as goals are met. The milestones and objectives involve a requirement of tangible results both in material investments and in accompaniment policies. But he has taken all administrations, including the European Commission itself, without prior preparation: they were not accustomed to operating.

P. And now comes safety and defense expense. The 5% objective of GDP begins the house for the roof, with the “how much” without having clearly established in “what” to spend.

R. It is probably like that. I doubt that this reference that is discussed, from 5% in the medium term, has a very rigorous analysis behind. Security is a common European public good and must be addressed with a whole vision. Sometimes we succeed in identifying a common cause that cohes us to boost the European project. In the financial crisis of 2008/2012 we did not know, but it did happen with the Pandemia of the Covid 19. Now the threat is to European security, due to the new global geopolitical situation and the persistence of the war in Ukraine. We need to commit ourselves. And it should be remembered the role of military spending as a growth dynamizer, especially if focused on activities related to R&D IY technology.

P. Would an expense of 5% be decapitated social spending and welfare state? Keir Starmer, Prime Minister of the United Kingdom, proposed and has recounted it.

R. The central bankers must be prudent and we cannot be prescribed in these matters related to the distribution of public spending since we lack the degree of democratic legitimation for this, we have no specific mandate in this area. But as an economist I can remember that Spain, which has a very limited fiscal space, can have some margin to increase investments in different activities, including defense. To do this, Airef has been carrying out public spending evaluations that can provide very useful elements to identify this margin.

P. The growth of the Spanish economy is expected as the most prominent in developed countries by 2025. Is it sustainable?

R. Next Tuesday we will publish a downward GDP review for this year. They will be a few tenths [desde el 2,7% publicado en marzo]. This review is compatible with the fact that Spain has generated some very powerful competitive advantages from the pandemic.

P. Some point in the annual report on 2024.

R. European consumers have changed their propensity to expenditure towards leisure and that benefits us countries that have more tourist offer. In addition, the other services, non -tourist services are growing significantly: consultation, audit, legal … that increases the demand for qualified workers, especially in technological activities. Another comparative advantage is energy. Before the Ukraine War, the cost of electricity for companies was higher than that of neighboring countries. Since then, more than 2024 has been reduced in Spain, it was 30% below those of the Eurozone, largely thanks to the deployment of renewable energy, as a recent study of the Bank of Spain underlines.

P. In banking, are there precedents that national consolidation has promoted some cross -border fusion, intraeuropea?

R. I don’t believe it. They are, for now, two different directions. The European banking market is still segmented. Very significant and important milestones have been reached to ensure the banking union, such as the unique supervision mechanism, but relevant elements are missing to complete the process, in particular the absence of a deposit guarantee fund at the European level. Difficulties persist in reaching cross -border mergers. Given that, attempts to gain scale in national domestic markets proliferate.

P. In its nine months of mandate, changes, resignations and remoctions have been multiplied in the Bank of Spain. Isn’t this image of instability dangerous?

R. This diagnosis does not respond to the reality of the last months, which is true that we have initiated a process of internal transformation of the bank to the view. This transformation starts from a diagnosis that we have made from external evaluations and internal surveys that show the existence of an effervescence in the template by this transformation. The latest work climate surveys show us that the workforce had a certain demotivation, for example, with the systems and procedures and with the job opportunities it had dropped to 40%. That is, the bank, whose workforce is formed by excellent professionals, needs an internal transformation.

P. They have resigned three senior positions, including the Director General of Economics, which is key, just after the annual report.

R. Ángel Gavilán does not leave for discrepancies with me or for anything related to the elaboration of the annual report and has expressed it. We have collaborated intensely since I am in the bank and I have a close relationship with him. Ángel Gavilán told me a few months ago that he wanted to find new professional challenges, something logical and legitimate after many years in office. I am sure you will find them because he is a great economist.

P. You have alleged lack of “technical capacity” to evaluate the operation of the pension reform. I would never have thought about the Bank of Spain and its intellectual power.

R. Well, maybe it was badly understood, or I didn’t express myself well. I wanted to underline that the independent authority of fiscal responsibility, Airef, has a clear mandate, the examination of the sustainability of the pension system. In addition, it specializes in it and in fiscal policy. And this year a few days before our annual report he published his evaluation of pensions, with a very detailed, extensive and interesting report, so we assume it.

P. But it coincides that the main reduction of the Bank’s report was operated in the pension chapter. Just about the reform of which you were the main author as Minister.

R. The decisive report in this regard was that of Airef, among other issues because its analysis was deeper than that of any other institution since it had more information. All our drafts were pending. When it came out, we could not contribute many additional elements, so we simplify it.

P. There is concern because the weight of the General Directorate of Economics can be reduced, which is a bank’s right.

R. On the contrary, my goal is to enhance it. I come from there, and I know how relevant it is for the institution. In the strategic plan that we have just presented, it is absolutely reinforced, both in technical and human media (with 35 new places). The reorganization places it as the center of three areas so far divided between several general directions.

Table of Contents

• José Luis Escrivá: “There is Less Confidence in the Dollar and the Assets of the United States”
  • Understanding the Context: The Global Economy’s balancing Act
  • Factors Contributing to Diminished Confidence
    • US Fiscal Policy and Debt Sustainability
    • Relative Economic Performance
    • Geopolitical Risks and the Dollar’s Hegemony
  • The Rise of Alternative Currencies and Payment Systems
  • Practical Implications and Potential Scenarios
  • First-Hand Experience: Navigating Currency Fluctuations
  • Case Study: The Eurozone’s Response to the Dollar’s Potential Weakening
  • Navigating an Uncertain Future: Practical Tips for Investors and Businesses
  • Examining Counter Arguments