The war in Ukraine currently shapes the context in which we live, just as the pandemic has done for the past two years. In addition to the human tragedy it has already caused, the war will have a global economic impact that is currently difficult to estimate. In the face of such uncertainty, it is important to seek certainties. And one of them is that the future we desire must be digital and sustainable.
In the short term, the Next Generation EU (NGEU) plan is already helping to boost growth thanks to increased demand. However, its medium-term importance is greater as a key component for the modernization of European economies. Through its two channels, capital injection and financing, the plan offers an opportunity to achieve solid and sustainable growth over time, accelerating economic convergence within a Eurozone damaged by both the health crisis and structural issues. The funds are conditional on concrete investment and reform proposals for the 2021-2026 period.
While not designed for continuity over time, the funds undoubtedly represent a step forward in the necessary creation of a common fiscal capacity, essential for completing the European Union. However, they entail counterparts and reforms, also when designing a debt adjustment plan for countries with higher public debt. All of this could also increase the ECB’s room for maneuver when designing and executing monetary policy in an environment like the current one with higher inflation.
It is estimated that NGEU will increase the weight of European public investment by more than 2 percentage points in the medium term, with an impact on growth of half a point in 2023. And reality could exceed these estimates if we consider the positive effect of reforms and succeed in encouraging the confidence of economic agents. At this point, public-private collaboration is fundamental to achieving greater efficiency and effectiveness of the funds, and banks, without a doubt, are a key player in Spain.
20% of European funds must be allocated to digitalization with various approaches: public administrations, businesses, digital training for society, and improved connectivity, reflecting the importance of the digital transformation we are experiencing and the extent to which it will shape our future.
Why is digitalization so relevant in European funds? Because it is key to the process of social and economic inclusion, as highlighted by the IMF. All the economic and social changes we are observing have digitalization as their central axis, and all economic and social activities now routinely use digital channels. This is a structural change from which all economic agents benefit.
According to data from the Ministry of Economic Affairs and Digital Transformation, in just one year of health crisis, the digital economy’s contribution to GDP increased from 19% to 22%. During the pandemic, a technological leap was achieved in a few months that would normally have taken years. Digitalization protected us from illness, allowed essential private services like financial services and public services to function. It also enabled teleworking so that many companies could maintain their activity. And perhaps most importantly, it allowed us to communicate during the toughest moments of lockdown.
Like any structural change, digitalization will require a more or less prolonged period of adaptation; a significant challenge for many individuals, businesses, and governments, which not all of us will be able, or willing, to face. Given this reality, it must not be forgotten that digitalization should be an advantage at our disposal, but never an insurmountable barrier. Banks have understood this clearly, and as we advance in the fight against the pandemic, they have readjusted access to financial services, ensuring in-person and preferential attention for the elderly and people with disabilities who require it.
The efficient use of NGEU funds is key to regaining some certainty about the future in a context as complex as the current one. We all must collaborate to make it possible, with public-private cooperation as the axis of action, essential to avoid wasting indispensable resources for Spain that also require good management and sound investment in initiatives that promote the necessary social, energy, and technological transformation.
José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association
