He Bank of Spain confirms in your Annual Report 2023 that in recent years there has been a loss of confidence in the institutions on the part of the different economic agents, who perceive an increasingly lower quality in their operation. As emphasized by the banking supervisor in a monographic chapter published this Tuesday on the structural challenges facing the Spanish economy, this discredit in institutions directly affects economic growth of the country, which is why it urges to reverse it to promote the productivity and advance of GDP.
“Since the financial crisis there has been a drop in trust and institutional quality in our country”, confirms the analysis of the Bank of Spain, supported by international indicators prepared by organizations such as the World Bank or the European Union. Despite recognizing the difficulty of quantifying the degree of trust and the perception of quality of the institutions, the banking supervisor points out that this process of discredit has been “more pronounced” in Spain than in other neighboring countries. “While in 1998 Spain was well above the euro area average in terms of institutional quality, in 2022 the situation would have reversed,” the report states.
According to the latest Eurobarometer prepared by the European Comissionbarely 28% and 25% of Spaniards trust, respectively, the national Government and Parliament, proportions much lower than the 36% and 39% in which the European average is located. “When comparing the level of trust of citizens in political parties, the national Government, Parliament and the judicial system between 2007 and 2023, Spain has gone from showing higher levels of trust than those of the other large economies of the eurozone to be below them,” corroborates the report published this Tuesday, which clarifies that Spain maintains its position as the second largest country with greater confidence in the judicial system, only behind Germany.
In light of these data, the Bank of Spain recalls that the quality of the institutions perceived by economic agents and their degree of trust in them are determinants of the long-term growth of the economy. Furthermore, he adds that these situations of discredit tend to be long-lasting, so their economic effects also tend to be “highly persistent.” Consequently, the banking supervisor points out that “it would be convenient to reinforce the quality and trust in Spanish institutions.”
Specifically, it points out that “there is room” to improve “regulatory quality”, thus referring to the excessive “volume and complexity” of the rules that regulate economic activity, which require companies to dedicate too many resources “to their knowledge and compliance and, sometimes, generate obstacles to market unity.” Not in vain, Spain is the EU country where smaller companies have the greatest weight: 76.8% of companies have between one and four employees, well above the 63.2% in Germany, 70, 4% from France and 72.5% from Italy. The institution directed by Hernández de Cos assures that this regulatory atomization “negatively” affects not only business size, but also the productivity of the Spanish economy and the effectiveness of the judicial system.
Likewise, with the objective of increasing productivity, the Bank of Spain also states that It is “necessary to promote the effectiveness and efficiency of Spanish Public Administrations”. The banking supervisor assures that this would have a “carry-over effect” to attract investments towards the private sector and recognizes that in recent times initiatives have been launched along these lines, although he urges a “rigorous evaluation” of their effectiveness in the next years.
In this sense, the organization points out that one of the priorities of the Recovery, Transformation and Resilience Plan is using them European funds to modernize Public Administrationsa purpose for which just over 4.2 billion euros have been allocated – of which 52% have already been executed, according to AIReF-. “This initiative seeks to improve the efficiency of the management of Public Administrations by promoting digitalization, improving energy use, reinforcing the public policy evaluation framework and reducing temporary employment in public employment,” he recalls.
Other points whose impact on institutional quality and trust will have to be assessed in the coming years, according to the Bank of Spain, are the recent modifications to the processes of access to public employment and performance evaluation of the officials. Beyond these changes, the Minister of Public Function, José Luis Escrivá, has also announced his intention to reform Public Administration to improve its planning, its efficiency and its ability to attract talent, an aim that, if materialized, could also affect the quality and trust in the institutions.
