A good part of Spanish households are in a situation of financial asphyxiation. Caused by the confluence of more than two years of inflationary pressures in the cost of living with the demands that the almost 18 months of increase in money (especially in the plane mortgage decreed by the European Central Bank (ECB)). This situation is causing the emergence of cash at a rate of more than one billion euros per month.
The situation also affects companies, to a greater extent the smaller their size and, consequently, their financial muscle to face the increase in financing costs. Their access is complicated when, in many cases, they have not finished paying off the debt to which, in part thanks to instruments such as ICO guaranteesthey had to resort to overcome the stoppage of activity due to the pandemic.
The data from the Bank of Spain They locate that flow (which is estimated by taking stock of the tickets issued and withdrawn in a period of time) by 16,980 million euros in the last year and a half18,599 if 2021 is included. And at 7,634 only from January to June 2023, with some slowdown compared to the pace of the last months of 2022, when it approached 1,200 per month.
This flow of money comes largely from savings bags leveraged by families and companies outside the financial system, and partially originated in the underground economy and the operations in ‘b’. And everything indicates that it will continue in the coming months. Everything depends, obviously, on the funds that remain in those hiding places.
The main reason is that the ECB, in line with the tightening of monetary policy adopted by a Federal Reserve that it has taken as a reference despite the absurdity of its recipes to stop inflation originating in demand, is keeping interest rates above 4%. This, in turn, maintains the prices of the euribor.
However, these measures are not bringing year-on-year inflation below 5% in the eurozone or consolidating it below the 2.5% in Spain. This maintains the two sources of financial pressure on families and companies, whose main allies right now are the improvements in wages and consumption and the stabilization of employment in record volumes.
“Money hidden ‘under the mattress’ is savings”
“Inflation is contained, but on a very high base, and the adjustment always begins with savings. Whoever has savings can maintain their standard of living until it runs out. And the money ‘under the mattress’ is savingsboth in families and in companies,” explains Antonio Luis Gallardo, head of Studies at the Association of Financial Studies (Asufín).
In this sense, the emergence of this leveraged money is concentrated, more than in the 5 to 50 that are used in domestic and formal economies, in high denomination banknotes. In those of 500, 200 and 100 euros that transit like ‘dirty’ and/or ‘b’ money through the circuits of the underground economy and criminal activities, respectively, due to its ease of handling in large quantities.
Thus, of the 11,585 million euros withdrawn from circulation in the last year by the Bank of Spain, from August 2022 to July 2023, almost 60%, 6,700, were concentrated in 500 bills (1,500 million)200 (1,600) and 100 (3,600).
A part of the 4,835 million euros withdrawn in bills of 50 (1,000), 20 (2,900), 10 (870) and 5 (65) in the last year have relationship with the reactivation of tourism. Historically, this sector has meant that due to the hand money brought from their countries of origin that foreign visitors spend in Spain, the losses were higher than the emissions in that range of ticketing.
Nor can it be ignored that the growing use of electronic means of payment on a day-to-day basis, to which the issuance of the digital euro. However, this reality coexists with the circulation of 47 million 500 euro (3), 200 (8) and 100 (36) banknotes, at a rate of 128,000 a day, in transactions that do not usually have much to do with do with domestic economies.
“Cash is condemned to remain residual,” says economist Carlos Sánchez Mato, alluding precisely to these processes.
When there is more month than salary
“We came from an environment with covid in which there was forced savings, reduced financial costs and low inflationand suddenly we find ourselves with the opposite situation,” notes Gallardo.
This financial requirement table is focused based on the income level in amortize loans and mortgages or to cover basic needs Once the initial phase of expenditure cutoften with an impact on some fundamentals such as food and mobility. And it is overcome, basically, in three ways.
They do it without problems those who continue to have more month than salary. When the needs exceed the salary, the options consist of using savings (declared or not) when they are available and, if they do not have them, putting in the effort if the bank, or an individual, trusts the affected person.
According to the last Consumer confidence index from the Center for Sociological Research (CIS), 51% of households have leftover rent at the end of the month, 31% arrive just right, 11.6% admit to having had to use savings and 5.1% have had to go into debt.
That is to say, one out of every three households is in a hurry and another out of every six does not arrive, percentages that place close to six already more than three million familiesrespectively, in those situations.
On the other hand, there are more (35.2% by 19%) who consider that the situation of their family finances has deteriorated in the last six months compared to 45.2% who perceive no changes.
More than 200,000 euros of extra money to make ends meet
According to data from the Bank of Spainthe rate of reduction of the deposits that families keep in banks is reaching this year a rate of more than 2,600 million euros per month (18,565 from January to July, 88 daily). Meanwhile, that of companies exceeds 3,200 (22,693, 108). In both cases, including those that are in sight and those postponed.
And, at the same time, the use of consumer credit it shot up to 18,548 in the first seven months of this year. A rhythm that clearly exceeds that of the two previous years and that points to a hiring volume clearly above 30,000, in line with the marks of 34,387 and 36,237 of 2018 and 2019, the two years prior to the puncture by the pandemic.
The sum of the slightly more than 15,000 million euros of debt that families maintain via cards stirring (6,700) and overdrafts (8,350), the 18,500 decrease in deposits and a similar amount in consumer loans places above 52,000 million euros the extra financing that households have needed in the first seven months of the year.
In the case of companies, that number shoots up to 260,000with 198,700 in credits (82,583 to be returned in a maximum of one year), and almost 61,500 in overdrafts and deferred payments.
If the sum of these two records is added to the more than 7,500 taken from under the mattress, the volume goes to around 320,000, or is above 200,000 if the financing is eliminated from the calculation of companies contracted for more than one year.