The two main concerns for European SMEs at present are the lack of qualified personnel and client acquisition. The latest European Central Bank survey also considers other business concerns such as rising costs and increasing competition. In contrast to these difficulties, financing does not appear to be an issue. Companies admit that finding funds is easy, especially from banks, and under very favorable conditions.
The SME survey results contrast with the recent shift in bias introduced by the European monetary authority, which has led markets to already anticipate new expansionary measures. We are all aware that growth risks stemming from trade tensions are now greater, accompanied by an intense academic debate on the underlying reasons for low inflation. In the long term, the monetary connection with inflation is evident, but in the short and medium term, low inflation appears to be due to a combination of non-monetary factors. The continuity of favorable financing conditions should be compatible with a reduced role for monetary policy in combating risks that may fall outside its scope of action.
Central banks approved significant expansionary measures during the crisis. In some cases, as in Europe, these measures were exceptional (officially considered so at the time) to combat an equally exceptional situation. A decade after their implementation and with the crisis overcome, in just a few months we have gone from anticipating a return to normality to debating what new expansionary measures can be taken. Apparently, with all options open. It is surprising in this regard that the past benefits of many of these measures, even the most distorting ones such as negative interest rates, are used as an implicit argument for extending them in the future. Expansionary monetary policy was the solution to first combat and then redirect a severe crisis of financial origin that has now been overcome.
Current risks and vulnerabilities do not have a financial origin. In some cases, such as high debt and asset price excesses, they have even been exacerbated by very lax financial conditions. Authorities should consider other measures, such as fiscal policy and supply-side measures, which complement and also reduce the current pressure on monetary policy. This desirable reduced role for monetary policy would lead to a moderation of the medium and long-term risks that its excessive use to boost demand can generate. Risks such as resource allocation distortion, risk management, penalization of savings, and financial stability. And all this without implying a deterioration in financing conditions, which would remain favorable for growth, as they are now, but also compatible with solvent demand for funds.
The interest rate is the price to be paid for obtaining financing. But it is also the return on savings. In theory, negative interest rates favor borrowing, but in practice, they penalize savings. The fall in long-term interest rates negatively affects the expectations of economic agents, which can accentuate economic deterioration. And it is not entirely clear that a negative return on money leads to greater economic impetus in the short term. Too much cost for too few benefits.
José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
