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Bank of Spain sees no risk of recession in Europe, Spain

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Bank of Spain sees no risk of recession in Europe, Spain
The metro station of Bank of Spain is seen in front of the Bank of Spain building in Madrid, Spain, May 22, 2018. REUTERS/Juan Medina   -   Copyright  JUAN MEDINA(Reuters)
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(Reuters) – The governor of the Bank of Spain Pablo Hernandez de Cos said there is currently no risk of recession in Europe or Spain, though he warned that political instability could hold back necessary reform in Spain.

“According to the economic models, which are not perfect, at the moment we do not see any risk of a recession in the euro zone, and much less so in Spain, but the determining factors for the future (Brexit, foreign trade etc.) are downward,” Hernandez de Cos said in an interview published on Sunday by Spanish newspaper El Pais.

Hernandez de Cos, who earlier this month was appointed chair of the Basel Committee on Banking Supervision, reiterated that Spain needs to continue reforms and fiscal consolidation and that parliamentary fragmentation could threaten this.

“My concern is that the political uncertainty may end up slowing decision-making on issues of political economy that we are all aware need to be taken: preparing public finances for the next recession, reducing public debt and passing necessary structural reforms,” Hernandez de Cos said.

On April 28, Spain will hold its third general election in five years, while polls show that no single party is likely to command a parliamentary majority, raising the prospect of untested coalitions or a minority governments as the only viable options after the vote.

“We have the feeling that the fragmentation of the parliament has already had some effect. For example, the structural deficit has not been reduced at all in the last four years,” he added.

(Reporting by Carlos Ruano; Editing by Toby Chopra)

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