The Spanish Government has lost a number of senior Civil Servants

AS has previously been observed, the Spanish Government has lost a number of senior Civil Servants particularly in the area of Finance.

Most recently, Carlos Cuerpo was appointed as Secretary General of the Treasury and International Financing to replace Carlos San Basilio who moved to the European Bank for Reconstruction and Development (EBRD).

Now as the European Central Bank (ECB) appears ready to reduce the amount of Government Bonds that it purchases to support the borrowing of countries like Spain, it is his job to ensure that there is no panic in the bond market or the economy.

Happily, he announced via Twitter that a new Green Bond was oversubscribed by a margin of times 12 and raised €5 billion without the need for significant ECB support.

What he and the Spanish Government must hope however is that the ECB doesn’t simply ‘turn off the financial tap’ but reduces support on a planned and steady basis.

The European Central Bank started the pandemic emergency purchase programme, or PEPP, in March 2020 and it allows the ECB to purchase different types of assets in financial markets.

By doing this, the prices of those assets go up and, by extension, market interest rates go down. All of this supports the economy by making borrowing cheaper for people, businesses and governments.

Spain has been a major beneficiary of PEPP but recognises that this support cannot go on forever and is currently in the process of getting ready by extending maturities on bonds and introducing fiscal policies which are aimed at reducing the need to borrow.

At one time ‘thanks’ to the pandemic, the country increased debt to the equivalent of 120 per cent of Gross Domestic Product (GDP) when the target has always been to borrow less than Spain earns.

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