The measures included in this plan would have a positive impact of 0.2 pp on the average GDP growth rate. situation, use of the Next Generation EU (NGEU) funds and financing conditions that, while somewhat tighter than in previous quarters, remain favourable. Turning to the inflation forecasts, in step with the paths of the corresponding futures markets, the upward pressures of the energy component are expected to peak in the second quarter of 2022 and then decelerate. The inflation projections rest on two assumptions: (i) that, in line with the information from the EBAE, the pass-through of higher intermediate costs to final prices will only be relatively moderate (albeit more forceful than envisaged in the December projection exercise); and (ii) that the second-round effects will be limited, i.e. scant feedback effects between inflationary pressures on prices and wages. Inflationary pressures will be partly alleviated by the measures contained in the National Plan to respond to the economic and social consequences of the war in Ukraine.4 Furthermore, these projections do not yet include the possible changes in prices on the electricity market that are currently being negotiated in the European Union. Against this backdrop, the projections see inflation standing at 7.5% in 2022. It will then fall in 2023 to around 2%, thanks, above all, to the moderation of the energy component. Underlying inflation will not start to decline until end-2022, once the upward pressures on firms’ costs associated with energy prices and bottlenecks have corrected.
Such a spiral in Spain would only exacerbate the pernicious effects of the current shock, since, in the present context, a simultaneous rise in prices and wages would erode our external competitiveness vis-à-vis other euro area countries and would aggravate the already harmful effects of the current shock on competitiveness, employment and economic growth. Further, were it to spread across the euro areas as a whole, such a feedback loop would require a more aggressive normalisation of the ECB’s monetary policy to ensure compliance with our price stability mandate. In my view, an incomes agreement, like the one I have been advocating since October, is warranted in order to ward off these scenarios. But what shape should this cost-sharing agreement take? In my view, this burden-sharing should be set out in an agreement forged under the framework of social dialogue (which we have termed an “incomes agreement between firms and workers”). However, I believe it should be defined based on certain general principles. I will specifically mention five that I feel are particularly important. First, the costs must be shared among all agents. In an extreme scenario in which firms attempt to keep their unit profits intact, a reduction in household purchasing power would ultimately translate into lower demand for firms’ products. At the other extreme, maintaining workers’ full purchasing power would pose a threat to firms’ capacity to generate sufficient funds to conduct their investments and, ultimately, would jeopardise their survival, to the detriment of employment and welfare.