Reflux?

We withstood the first wave of the pandemic strong in spirit. Faced with a lethal and little-known threat, each of us understood that we had to act as if motivated by a great faith: if we made the effort, there would be a way out. This generated a collective will to survive, accompanied by a high intensity emotional state, which allowed us to endure. Faith was rewarded: we smoothed the curve.

However, then came the second wave, and then the third, which we are still in. We could have been demoralised. We avoided it because, on the one hand, we were more prepared and it showed. And, on the other, because on the two fronts of the fight against the pandemic, the health and the economic, we have received news that have filled us with hope, have generated positive emotional waves and have helped to keep our spirits high. In the health sector, the wave has been driven by the prospect of vaccines, and in the economic sector by the prospect of European funds. Optimism, on both sides, is justified, but I fear that with the beginning of the practical implementation of vaccination and the European funds, an emotional reflux towards pessimism is taking place which, if we do not manage it well, could be the origin of a downward spiral.

With vaccination the problem is that, in relation to the initial expectations, the process has slowed down. Moreover, we have the impression that the authorities are not quite sure what the pace will be from now on. When someone tries to assure us that 70% of the population will be vaccinated by the summer, we do not give them the credibility that Mario Draghi had when he told us that the euro would not fall. We knew that Draghi had the instruments to guarantee this. This is not the case now. The essential problem is supply. We don't know whether the delay will be a matter of days, weeks or months. In the meantime, rumours are flying, asymmetries (Italian colleagues already vaccinated) are brewing, small obstacles are being magnified and uncertainty is increasing more than would be justified. I remain relatively optimistic. The Johnson & Johnson vaccine has just been approved, and there will be more. I don't think that the way to proceed is to unilaterally suspend vaccine exports. We cannot be inconsistent. If Europe wants to have industry with export capacity, we cannot not honour contracts when it suits us.

Even if it is for a short period, a new climate of uncertainty at this time will have consequences for the economy. It jeopardises the summer season, and not just for tourism. I give an example. The European Academy decided three years ago to hold its annual conference permanently in Barcelona in October every year. A benefit not only for the visitor industry but also for the contribution to the centrality of Barcelona in the European scientific ecosystem. It was done, successfully, in 2019 and, of course, in 2020 it became virtual. It had to be taken up again this 2021 in person. Well, on Thursday I received the communication that it would be virtual. I am convinced with a very high probability that things will be fine in October. But the plans are being made today and in the ebb and flow prudence is imposed.

As for the European funds, the disappointment is not yet very pronounced. But it is inevitable and it should be monitored now. It is true that the injection of European money will be remarkable and, therefore, spending by the public sector will increase and this will be good for the economy. But it has also been insisted on that there would be resources for new business projects, not simply contracts. And here I fear that it will not be possible to meet the expectations that are being generated. They have to be grounded. I believe that for good business projects of an incremental nature, the support will basically be in the form of loans, perhaps with a minor (but not to be underestimated) component in the form of grants. The decisive factor will therefore be that we are now living in a period, which may be long, of low interest rates. This environment is in itself a stimulus to investment. But this does not exclude that public initiative is not important: it can make a difference. At the end of the day, one of the benefits of the Next Generation could be that it has spurred the formulation of a multitude of projects, a fraction of which will be viable with a small amount of support (a nudge). In short, to encourage and push the animal spirits of which Keynes spoke. However, the authorities will need to be subtle in their message to avoid an exuberance that will lead to discouragement tomorrow, or a call for realism that, due to its crudeness, will bring the discouragement today.