Take 5 and come back tomorrow (27/11/24) Markets Budget BBVA SAB Productivity Pensions

None of what follows is investment advice.

Market environment: What’s in a name? – (Asia-Pacific markets were little changed with modestly declining European markets and US futures) – Asia-Pacific markets were little changed as investors digested the new nominations for posts in the Trump administration. European markets and futures for the US declined moderately.

Response to the crisis: When wishes meet reality – (The EC backs Spain’s Fiscal Plan but calls for a budget that applies it (Expansion p27) – The EC approved Spain’s 7-year Fiscal Plan but demanded that it deliver on the promised tax increases and approve a budget for 2025 applying the terms of the plan. This is where wishes meet reality, as the Government has shown itself unable to have any meaningful measures approved by Parliament, including those destined to provide the increase in tax collection set out in the Fiscal Plan. With the Government increasingly weakened by corruption scandals and vulnerable to additional spending demands from its regional/far-left parliamentary allies, it is difficult to see how it can improve on recent performance.

BBVA/Sabadell: The Government is not your friend – (The EC authorises the BBVA bid for Sabadell leaving the Competition Authority (CNMC) and the Stock Exchange Commission (CNMV) as the last regulatory obstacles to the bid (Expansion p19) – The EC review was mostly about whether BBVA was benefitting from state aid in its bid for Sabadell (which it is not). And a proof that BBVA does not benefit from state aid or, indeed, any kind of support is that the remaining obstacles centre on the Competition Authority’s view (part of the Government) and the Government itself, which are tougher hurdles because the Government has already made it clear it does not favour the deal.

Productivity: Putting the cart before the horses – (The head of the UGT trade union says that in order to gain productivity Spain has to raise wages and reduce the working week (Cinco Dias p21) – Reading the above interview it is difficult not to despair over the future of Spain’s economy, as Mr Alvarez confuses the fruits of productivity (higher wages/lower working hours, in addition to higher profits) with its causes. This is putting the cart before the horses.

Pensions: Crowding out – (The average pension rises 5.3% YoY, triple inflation (Expansion p27) – The sharp rise is due to the fact that the pensions are updated with last year’s inflation (which was higher than current levels) and that the new pensioners collect a larger pension that those who leave the system. Add to the mix a 1.5% rise in the number of pensioners and the overall increase amounts to 6.9%, crowding out other spending policies within the budget.