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Decisive 24 hours for Spain

The next 24 hours are going to be decisive for Europe and for Spain. Tomorrow the European Council (EC) and the Governing Council of the European Central Bank (ECB) meet. The issues to be discussed in the European Council are: the European Recovery Fund (Next Generation UE) and the veto of Hungary and Poland, and the agreement or disagreement of Brexi. On the same day, the Governing Council of the ECB meets and will have to decide the monetary policy strategy for 2021 in light of the macroeconomic forecasts.

The debate on the substance Next Generation UE not yet completed. Hungary and Poland do not accept the prior conditionality to access the fund: respect for the principles of the rule of law.



The delay will hurt the recovery from the biggest crisis in recent decades. Spain, without the 140,000 million euros that correspond to it, could take more than a decade to recover. In the absence of an agreement, Brussels threatens to create an alternative fund of 750 billion euros with the endorsement of the 25 European partners. Poland and Hungary would be excluded.

Just a few days after the end of the transitional period of the Brexi As of December 31, there is still no agreement on UK trade and political relations with the EU in the post period Brexi. The pending issues focus on fisheries, equal conditions of competition and post-governance governance. Brexi. Today the president of the Commission Ursula Von der Leyen and Boris Johnson are scheduled to have an emergency meeting with the aim of reaching a minimum agreement. The situation is dire. Boris Johnson is caught between a rock and a hard place, as a disagreement would seriously damage Britain and a deal involving the transfer of sovereignty would cost him his job.

Tomorrow the Governing Council of the ECB meets. The objective is to consolidate the recovery and reduce the deflationary tensions that still persist in countries like Spain. To achieve the objective of economic recovery, an agreement must be reached both in the Brexi as deep down Next Generation UE. The price stability objective is the most difficult to achieve in view of the fact that deflationary tensions persist in countries like Spain, with negative inflation of -0.8%. On the other hand, the persistent revaluation of the Euro is being an obstacle, since the revaluation of the currency, via cheaper imports, aggravates the fall in prices. Analysts expect the ECB to undertake a new injection of liquidity by expanding the PEPP program by 500,000 million euros, to reach 1.85 trillion euros. It is also expected to renew the financing lines for banks (TLTRO).

The ECB is running out of ammunition, although it keeps talking about the availability of new tools. Despite the loneliness and impotence of the European Central Bank is reaching its limit. This time with the accompaniment of the fiscal policy, so often claimed, and a growing debt, which can become unsustainable.

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