Calvino resumes the Income Pact to stop runaway inflation

The Government uses the income pact to counter a runaway inflation. June closed at 10.2%. Nadia Calvino, the economic vice president, confirmed that the Executive will meet with social agents on Wednesday to attempt to break down negotiations that have been stuck for months. This is due to the extremely distant positions that unions and companies maintain on salary review clauses in an inflationary context that almost seems historical.

"This income pact is important because it provides a more stable, trustworthy and reliable framework for citizens in this current uncertainty environment. After the meeting with Economic Advisory Council, Calvino indicated that he would transmit his support and contribution to social agents in order to promote this agreement between social agents.

In order to fulfill its great hope of distributing the cost of war and inflation between workers and companies, the Government was forced to enter the process again. Calvino stated that everyone has a common interest in fair distribution and that there must be moderation in all incomes in our economy.

However, the differences between representatives from each side were not easily overcome. To guarantee purchasing power, the unions insist on maintaining the salary review clauses. Businessmen are reluctant to agree, as they fear that the CPI would generate second-round effects if the revaluation is linked to it. This analysis is also shared by the Bank of Spain.

Pablo Hernandez de Cos de Cos, the governor of the agency acknowledged that there was already an "implicit Income Agreement" because wages have not been updated to reflect inflation. He assured however that the de facto agreement, in which real wages are declining and business margins remain moderately evolved, should be formalized by an agreement with wage increases below inflation "also moderating margins in Business".

It is important to stop the inflationary spiral, which, if it continues, could destroy even the most optimistic recovery forecasts. Calvino admits that the spiraling rise in prices is "a major concern of the Spanish". This problem was addressed in a meeting with the eighth type of committee of experts. It focuses on the improvement of labor markets, normalization of monetary policies, and the development of a Plan of Recovery.

Calvino assured that the uncertainty has not led to the Spanish economy registering a negative quarter. He also praised the anti-crisis plans and the measures taken to curb inflation. He did not rule out the possibility of making new forecasts as to whether the price peak is already reached. However, he said that the "measures put in place since last January are reducing inflation approximately 3.5 points."

He acknowledged that "the news about the evolution of oil prices is not good", but he also said that sanctions against Russia's invasion of Ukraine had caused a drop in growth projections for the euro area. He warned that the media should be prepared to deal with an inflationary scenario that is more persistent and more complex.