La Caixa savings bank says greater structural reforms are needed at world level in 2011

Barcelona (ACN).- La Caixa is pushing for greater structural reforms within the Spanish economy, but also regarding the European economy and the world’s financial system. La Caixa admits that the global crisis is over and will not return. However, the Catalan savings bank stresses that new structural measures are needed to restore macroeconomic stability and market trust. It also underlines that financial stimulus should be over, as well as “the currently relaxed monetary policy”. Nevertheless, to do so, a continuous growth context should be happening on a world scale. In addition, another issue to solve would be ending the currency war to avoid a protectionism escalation.

La Caixa warns about 3 challenges at a world level to foster the economy’s recovery. The first one is to suppress the current fiscal stimulus packages and to address the “currently relaxed monetary policy”. This should be done without damaging the economic activity’s recovery. To see this happen, a sustained environment of economic growth is needed at the world level.

For Spain, La Caixa foresees that economic growth will reappear at the end of 2010 and especially throughout 2011. In 2011, the economic recovery will be definitively consolidated in Spain, and the GDP will grow 0.7%, according to La Caixa. The study underlines that the Spanish economy’s practical stagnation of the last months is due to the VAT increase in July, the end of the car-acquisition stimulus and the deficit reduction measures taken in May, such as the decrease of public employees’ salaries.

The second challenge is to correct the world’s unbalances, mainly created by the currency war. This war may lead, La Caixa warns, to a protectionist escalation that will endanger the economic recovery at a global level. The announcement of a second monetary expansion by the US Federal Reserve and China’s resistance to appreciate its currency make other countries devaluate their currency, fearing to lose competitiveness.

The third challenge for 2011, according to La Caixa, will be to advance structural reforms to restore macroeconomic stability and trust. This would definitively ensure the recovery from the worst recession of the world’s economy in decades. Through these reforms, the changes started in the banking system, through the gradual implementation of the Basilea III agreement, will be strengthened. Changes should also be adopted in other areas of the world’s economy to increase growth potential, better public sector productivity, eliminate obstacles in job creation and redirect the high levels of debt in the private sector.