Brussels warns of the end of wage increases in the EU due to the pandemic

The euro zone continues to struggle to avoid the collapse of its economies, but Brussels is already pointing out the risks that come later: more public and private debt, the end of wage increases and a social crisis that has not yet emerged in its fullness.

Among the countries most threatened by these imbalances is Spain, to which the Commission once again demanded "a strong commitment to reforms."

"We are going in the right direction, but we still have to work together in the coming weeks," said Commissioner Paolo Gentiloni after the presentation of the Spanish plan by Vice President Nadia Calviño at the Eurogroup.

Europe starts the year after having activated the key lever for recovery.

Without the deployment of the vaccine, there is no possible recomposition of sectors such as tourism or transport.

However, it also begins with central Europe struggling to get out of a tough second wave and the south trying to minimize its third round of infections.

The rate of economic recovery will depend on these two variables - the efficacy of the vaccine and the intensity of new infections.

There is a third variable: recovery plans, which will inject up to € 800 billion into the European economy.

Brussels hopes that these plans will not only serve to relaunch activity, but also to correct the imbalances that, according to a technical note from the European Commission, are being "aggravated" by the pandemic, which could even lead to new risks.

The document, debated by euro zone ministers, lists all those risks: public debt will grow due to measures to protect the economy, while companies and households could find it difficult to meet their obligations if the pandemic leaves them inactive;

wage and productivity increases will end;

house prices will fall, and banks could find themselves in trouble again.

"The

COVID-19

seems to exacerbate existing imbalances in the euro area," highlights the document discussed by the ministers.

And the forecasts are, if possible, worse for Spain, France or Italy: the pandemic will only accentuate the already existing patterns in terms of public debt and even the divergences between partners.

And the extent of the probable mortality of companies or unemployment, the great pending issue in Spain, is not clear either.

The Commission sees in the so-called recovery and resilience plans the recipe for addressing these “structural weaknesses”.

In silver: with reforms, but this time protecting public investment.

The ministers of the euro zone, precisely, started a round of presentations of their plans.

And they started with Spain.

According to community sources, because it is one of the countries that has advanced the most in the program.

Calviño said that Brussels already had 28 of the 30 reform packages that it will implement, and that the other two - the labor market and the pensions market - were on the way and could arrive immediately.

Calviño's exhibition was praised both by Gentiloni - who called it "brilliant" and "exhaustive" - ​​and by the president of the Eurogroup, Paschal Donohoe, who said it was "excellent".

The minister, as she said before her speech, conveyed to her counterparts the "sense of urgency" of the "full implementation of the recovery plans."

"The plans are countercyclical macroeconomic instruments and it is now that we have to make an investment and reform effort to try to offset the negative impact of the pandemic, especially in those countries most affected, such as Spain," said the head of Economy.

However, Brussels wants to pay special attention to Spain due to the magnitude of the economic collapse - the Commission predicts that in 2020 the economy fell by 12.4% - and the injection of funds it will receive, of up to 140,000 million euros.

For this reason, the Commission believes that there is still a lot of fabric to cut.

Technicians from Madrid and Brussels continue to exchange roles and ministers and commissioners continue with meetings.

Gentiloni explained that, as with the rest of the countries, the Community Executive asks Spain for "a strong commitment" to the reforms, specifying objectives and milestones that must be reported periodically.

Especially in three areas of great interest to Brussels: the labor reform, that of the pension system and that which guarantees market unity.

And that still requires weeks of negotiation.

There's time.

The process of ratifying the recovery plan in each country has not finished.

So the first 10,000 million will not reach Spain, at the earliest, until spring.