José Luis Escrivá has outlined his plans to revolutionize the State’s public administration by harnessing new digital technologies. The aim is to modernize the central administration, which in some areas still relies on outdated methods reminiscent of the 19th century. Artificial intelligence will play a prominent role in this transformation. Escrivá’s vision is to create a state administration that meets the high quality standards of Scandinavian democracies, eliminating mandatory appointments and discontinuing personnel replacement rates from 2025.

These goals were presented by the new Minister of Digital Transformation and Public Service during a session in the Congress of Deputies. Escrivá has taken the reins from María Jesús Montero, with a clear focus on modernizing the state public sector through digitalization.

The model to aspire to is that of the Nordic democracies, whose administrations consistently receive top ratings in international surveys of public service satisfaction. “We still have a long way to go to measure up to the best in class,” Escrivá remarked.

To achieve this modernization, the new ministry will focus on revitalizing the staff, which has been greatly depleted due to the aging of public employees and the low replacement rates since the 2008 financial crisis. Escrivá proposes to gradually phase out the current replacement system, ultimately eliminating it by 2025, and adopting a model that better meets the State’s service needs.

According to sources within the ministry, the objective is twofold: first, to reverse the loss of personnel suffered during the 2008 crisis, and second, to align with the OECD’s average for public employment—a level Spain currently falls short of. This will involve rejuvenating and redesigning the workforce.

End of mandatory appointments

Another significant change proposed by Escrivá is the removal of the mandatory prior appointment requirement for accessing public services in person. To implement this change, the ministry will work on amending the administrative procedure law, specifically article 14, which currently allows for mandatory appointments. While prior appointments will still be utilized as an organizational tool, they will no longer be obligatory. The ministry highlights that certain individuals, especially the elderly and vulnerable, will still have the option for in-person assistance, as no substitute can fully replace personal interactions.

The Public Service intends to introduce more flexibility in personnel management, granting managers greater autonomy in designing and organizing their teams. This will involve reducing pre-emptive controls and implementing more post-evaluation assessments.

One of the most significant organizational innovations will be the creation of a cross-functional unit within the administration, comprising an ample number of staff members. This unit will be responsible for addressing external disturbances that require swift and extensive public intervention. The inspiration for this concept comes from the Military Emergency Unit (UME) of the army, which has proven highly effective during the pandemic and the management of European funds.

Escrivá also aims to incorporate practices and customs from the private sector into public administration. A talent recruitment plan will be introduced to make the public sector career path more attractive, based on a new model that considers levels and skills. Furthermore, a statute for public managers, built upon merits, skills, and objectives, will be proposed to ensure effective evaluation.

Southern European countries still remember how during the worst moments of the great recession of 2008 the word PIGS became popular to refer to them (PIGS, which means “pigs” in English, is the acronym of Portugal, Italy, Greece and Spain in that language). The PIGS, a clearly pejorative term, were the economies that performed the worst during the crisis and that hampered the growth of the eurozone.. 15 years later, the group is experiencing a kind of revenge: they are managing to weather the pandemic crisis and the war in Ukraine better than their northern neighbors. Although the gap opened by the great recession still remains.

Eurozone GDP data in 2023, released on Tuesday by Eurostat, once again paints a flat encephalogram panorama. Euro countries have now gone 15 consecutive months without seeing anything resembling economic growth. After a third quarter in which the economy contracted 0.1%, the eurozone has miraculously and unexpectedly avoided technical recession: its GDP did not move in the final three months of the year.

Something that is especially striking when Germany and France, which make up 50% of the eurozone in economic terms, suffered contraction and stagnation respectively.. How is it possible that the eurozone has avoided going into negative territory with half of its GDP practically in the red? the answer is in the south. “The economies of southern Europe led growth and were the main reasons why a technical recession was avoided,” says Bert Colijn, chief economist at ING.. A diagnosis in which the Bloomberg news agency agrees. “[The eurozone] maintained its stable production, favored by the expansion of Spain and Italy,” they point out.

In the case of Spain, GDP increased by 0.6% in the last quarter of the year, while Italy grew by 0.2% and in Portugal it grew by 0.8%.. Figures that contrast with those of Germany (-0.3%), France (0%), Sweden (0.1%) or Austria (0.2%). What was observed in the final quarter of the year is part of a trend that has been observed since Russia invaded Ukraine in February 2022.. While the German economy has remained frozen in its pre-war dimension, the southern countries have managed to maintain dynamism.

Proof of this is that, compared to pre-pandemic records, the GDP level of Spain, Portugal, Italy or Greece exceeds that of northern economies such as Germany, the Netherlands or Austria and also that of France. The Spanish economy is now 9.8% larger than in the fourth quarter of 2019 (the last before the pandemic); Portugal's GDP is 10.8% higher, Italy's is 7.7% higher and Greece's (without data yet for the fourth quarter) is 8.6% higher than then.

In contrast, the German economy is only 2% larger than before the pandemic, Austria's GDP has grown by 4.6% since then, while Sweden's has grown by 6.7% and France's by 7.6%. Among the large northern economies, Belgium is one of the best performing, with a GDP level 8.1% higher than at the end of 2019.

The current situation radically contrasts with the panorama experienced during the great recession of 2008.. If we analyze how these same countries were doing four years after that date – the same ones that have passed since the pandemic until today – the image is the opposite.. In the first quarter of 2012, Germany, Sweden, Belgium, Austria and France had already recovered their pre-crisis GDP level and the Netherlands was only 1.4% below. On the other hand, the economies of Spain, Italy, Portugal, Spain and, above all, Greece, were still sinking.

Why is this time being different? Why are more productive countries with healthier public accounts coming out worse? The war in Ukraine and the different nature of the current crisis are the keys. The German case sheds a lot of light. Germany has been hit by a strong industrial crisis, aggravated by the sharp increase in the price of energy after the closure of the Russian gas tap. In addition, the country faces increasing competition from China, a regular client of the powerful German industry, which is changing its role towards a producer.. Consequently, the main muscle of the German nation has been weakened.

In contrast, the south—more dependent on the service sector and less on industry—has benefited from the full recovery of tourism and other high-contact services.. Furthermore, countries like Spain or Portugal depend much less on Russian gas, so the impact of the war has been much more modest.

The scars remain

Although this time it seems that it is the southern countries that are weathering the crisis better, the deep gap that opened between the south and the north during the great recession is still far from being closed.. If we take an arithmetic average of the GDP of the southern countries and the most representative economies of the north (Germany, Austria, Belgium, the Netherlands and Sweden), the differences are evident.

While the northern bloc currently has a GDP level 18% higher than in the first quarter of 2008, in the south it is barely 4.3% higher. However, the differences would predictably be reduced if the importance of each bloc is weighed (in the case of the south, the very serious collapse of Greece greatly conditions the results).

Salaries have experienced growth in recent years, but this has not been uniform across all autonomous communities. In fact, the disparity in average salaries between regions has increased by 15% since 2021. The Community of Madrid and Extremadura remain at opposite ends of this heterogeneous reality, with only two communities escaping the decline in purchasing power experienced by workers over the past two years.

According to the Adecco Employment Opportunities and Satisfaction Monitor published recently, the average salary increased by 5.4% last year compared to 2021, reaching its highest level in the historical series at 1,920 euros gross per month. The report highlights that there have been consistent year-on-year increases in average salaries across all autonomous communities for the past eleven quarters, indicating a recovery process that began in 2021 after the pandemic.

In the past two years, salaries have increased in all communities, albeit with significant variations. While the Balearic Islands and the Community of Madrid have seen average salary increases of 7.7% and 6.7% respectively since 2021, Extremadura and the Canary Islands have seen increases of just over 3%, less than half of the former. This disparity in salary increases has widened the gap between the highest and lowest average remuneration by 15%, with Madrid and Extremadura being most affected.

In Madrid, the average salary reached 2,282 euros per month in 2023, which is 749 euros higher than in Extremadura, where the average amount stood at 1,533 euros. Besides Madrid, only three other regions exceed the national average salary – the Basque Country, Navarra, and Catalonia – where the amounts reached between 2,056 and 2,282 euros, representing a 4.6% to 6.2% increase compared to 2021.

The four leading communities maintain their positions, although the distance between them varies. The report states that Navarra has managed to surpass Catalonia, and Madrid has also outperformed the Basque Country in terms of average salary growth.

At the opposite end of the spectrum, there have been no changes. Extremadura continues to have the lowest average salary in 2023, with the Canary Islands just above that level as the second lowest. In the Canary Islands, salaries increased by 4% last year to reach 1,630 euros per month, followed by the Region of Murcia at 1,674 euros after a growth rate of 5.9%.

Despite the increase in salaries, purchasing power has not seen a corresponding boost over the past two years. On the contrary, the purchasing capacity of Spaniards has decreased by 2.6% since 2021 due to inflation, resulting in a loss of 610 euros per year. The decline in purchasing power was primarily concentrated in 2022 when prices rose by 8.4%, an unprecedented annual rate in history. While there has been some recovery in the third and fourth quarters, with a 0.2% and 1.5% increase respectively, the purchasing power of the average salary in 2023 remains lower than the peak reached in 2009, with an 8.8% decrease.

The uneven increase in salaries across communities has occurred alongside varying degrees of price increases. After adjusting for inflation, fifteen regions witnessed a reduction in purchasing power in 2023 compared to 2021. The most affected were Asturias, Galicia, and the Basque Country, with declines of 5%, 4.8%, and 4.6% respectively. This translates to a decrease of more than 1,000 euros in purchasing capacity compared to 2021.

In contrast, only residents in the Balearic Islands and the Canary Islands experienced an increase in purchasing capacity, with growth rates of 3.1% and 2.1% respectively. In the Balearic Islands, workers had an average of 674 euros more in annual earnings at their disposal, while in the Canary Islands, the figure stood at 399 euros.

The Spanish economy experienced a significant acceleration in the final months of last year, managing to grow by 2.5% despite the overall stagnation in the eurozone. This positive news was reported by the National Institute of Statistics (INE), which recently released the national accounting data for the fourth quarter, providing a complete picture of 2023. The growth was predominantly driven by strong tourism activity, robust employment performance, and the recovery of purchasing power lost during the inflation crisis.

The INE’s published data surpassed all expectations, particularly for the final quarter of the year. According to the statistical institute, the GDP increased by 0.6% in the last stretch of 2023, double the consensus forecast of analysts and the Bank of Spain’s projection.

With these figures, Spain has confirmed its position as the largest growing economy in the eurozone for 2023. Notably, Spain, along with Portugal, experienced the most significant GDP growth in the final quarter of the year. In contrast, larger eurozone economies remained stagnant, with Germany’s GDP falling by 0.3%, France’s remaining flat (0%), and Italy’s growing only by 0.2%.

Economy Minister Carlos Body sees these figures as positioning the country favorably and setting an “advantageous starting point” for the government’s expectations in the coming year. The government anticipates a growth rate of 2%, exceeding the majority of analysts’ predictions of 1.5%. Moreover, the recent data provides an additional growth of three tenths of GDP for 2024 compared to previous projections. Consequently, it is likely that growth forecasts for Spain will be revised upward in the weeks ahead.

While the growth of the Spanish economy in 2023 was slower compared to the previous year’s 5.8% surge in its recovery from the pandemic, it was still a notable achievement. This growth rate marks Spain’s best annual figure since 2017, especially when considering the challenging external context where the eurozone as a whole has endured over a year of stagnation.

The Minister of Economy, Carlos Body, attributes these encouraging results to the restored purchasing power of Spanish households and the resilience of the labor market, where four out of every ten jobs created in Europe were generated in Spain.

National demand was the primary driver of economic growth in 2023, led by consumption spending from Spanish households and public administrations. However, investment and the foreign sector did not contribute to the growth.

The significant increase in employment, with the creation of 789,600 new jobs and 2.8% more hours worked, played a crucial role in driving consumption. The rise in employment and efforts to regain purchasing power resulted in an 8.2% increase in the country’s wage bill last year. Nevertheless, this data does not accurately reflect the actual increase in salaries in 2023. To get a more precise understanding, one must refer to remuneration per equivalent salaried job position, which grew by 4.4% in the fourth quarter compared to the end of 2022.

Services accounted for 80% of the growth in the fourth quarter, especially high-contact services related to tourism, such as commerce, transport, and hospitality. Additionally, services linked to public administration, such as education and health, contributed to the positive performance.

One area of concern, however, is productivity, which experienced a decline in the fourth quarter in terms of both hours worked and their efficiency per job. The productivity of each employee in the Spanish economy was 1.8% lower compared to the equivalent quarter of 2022, while hours worked were 0.8% less productive.

The year 2024 has started with a resurgence in the rate of price increases. Preliminary data from the Consumer Price Index (CPI), released by the National Institute of Statistics (INE), revealed that inflation rose by three tenths in January, resulting in an annual rate of 3.4%. This upward trend was primarily driven by the hike in electricity bills, which lost some of its tax credits at the beginning of the year.

This marks the fifth consecutive month in which the inflation rate remains above 3%, a level at which it has stabilized in recent months. In December 2023, the CPI recorded an annual variation rate of 3.1%, slightly lower than the 3.2% in November but still higher than the 3.5% observed in October and September. Although the indicator has remained relatively stable in January, it has risen for the first time in four months. In terms of monthly changes, prices have increased by 0.1% compared to December.

The provisional reading from the INE attributes the rise in inflation mainly to the increase in taxes on electricity, which has made it more expensive compared to the previous year, despite experiencing price reductions during that period. As a result, consumers have felt the impact of the VAT increase on electricity from 5% to 10% since the start of the year. On the other hand, fuel prices have reportedly decreased in January, contrary to what happened at the beginning of 2023. However, precise data and category breakdowns are yet to be released and will be available by mid-February.

The relief in fuel prices is reflected in the behavior of core inflation, which has continued to decline. This particular indicator excludes the prices of energy and unprocessed food from its calculations due to their high volatility. It has recorded its sixth consecutive month of moderation, with an annual rate of 3.6%, the lowest level since March 2022. “This path of inflation moderation is compatible with maintaining support measures for households and businesses most affected by rising prices,” said Carlos Body, the Minister of Economy, Commerce, and Business.

As a result, general inflation and underlying inflation are narrowing the gap, with only two tenths of a difference. This closeness between the two indicators has not been observed since the beginning of 2021. In March of the previous year, the difference between the two rates exceeded four points, immediately following the peak of core inflation. This moderation in the index has occurred amid the resilience of the Spanish economy. According to data released by the INE, GDP grew by 2.5% in 2023 and accelerated in the final months of the year, despite stagnation in Europe.

“We, as the government, are demonstrating that economic growth, job creation, and measures aimed at social protection and the well-being of citizens, households, and companies can coexist,” defended Carlos Body. The extension of certain anti-crisis measures, such as the reduction of VAT on essential food products and aid for public transportation, led to the Independent Authority for Fiscal Responsibility (AIReF) revising its macroeconomic forecasts last week. The AIReF lowered its estimated average inflation for 2024 to 3.3%.

The movement of prices throughout the year will play a decisive role in shaping the monetary policy roadmap of the European Central Bank (ECB). In its recent meeting, held last week, the ECB decided to maintain interest rates at 4.5% for the third consecutive time. The president of the ECB, Christine Lagarde, stated that it is still premature to discuss a rate cut. However, she previously acknowledged that it is “likely” for the first relief to be implemented in the summer.

While waiting for the January data to be released on Thursday, eurozone inflation has already increased by five tenths in December, reaching an average rate of 2.9%, which is lower than the inflation rate in Spain. This increase follows a seven-month period of price moderation and moves further away from the ECB’s objective of achieving 2% inflation.