Juan José Toribio: “The Way Out of this Rut is to Balance Out Supply and Demand Problems”

21/06/2011

"Our country has not been the one hit hardest by recession, by any stretch, although it does have the world's second-highest unemployment rate, following South Africa. There are currently over five million people without jobs and less than three collect unemployment insurance." The head of the CIIF, Professor Juan, yesterday said it is very difficult to revive private consumption while controlling government spending. "The way out of this rut is to balance out supply and demand problems and restore the country's competitiveness," he added.

This was at the 18th Annual Symposium of the International Center for Financial Research (CIIF), which took place yesterday on the IESE campus in Madrid and was led by Professor Toribio, and also featured Rolf Campos, professor of economics, and Pablo Fernández and Jorge Soley, professors of financial management at IESE.

Campos opened the symposium with his talk "Good bank, bad bank; hidden economic theory." From the economic standpoint, as opposed to accounting, Campos gave a brief historical overview of these concepts, particularly zeroing in on recent Spanish cases, namely Bankia and CaixaBank. His analysis focused on the different liabilities of the two entities, while offering some minor predictions about what would happen in the future if the bad banks, which typically have considerable liability, fail to recover, and on whether one solution would be to prevent large banks from being created or to punish them once created.

The next presenter was Fernández, who spoke on "Risk premium and betas. Survey results and common sense." He reviewed a survey of 6,000 people about the risk rate used in their studies, the market premium used, and reference books and articles in that realm of the financial sector. Citing the survey results and evaluations (predominantly centered on the United States and Spain), Pablo Fernández presented a retrospective from the onset of the crisis in Spain up to the present, recalled that "this is a crisis among financial institutions" and posed some questions for attendees to reflect on.

"Basel III, Solvency II and the insurance companies" was the topic chosen by Jorge Soley to discuss the changes and the role of financial institutions in the Spanish insurance market. To Soley, the main problem with the regulation of insurance companies "is the large number of authorities involved in the legal process." He also touched on the situation of savings banks and their role in the financial crisis: "The real estate crisis will be long term, and therefore so too will the financial crisis of the savings institutions." Soley added that the key for savings banks, as seen in the case of Bankia, is to search for small investors to raise funds.

Juan José Toribio put the finishing touch on the symposium with a rigorous analysis on the "Economic outlook." To bring the two hundred or so attendees up to speed, Toribio gave a brief review of global growth at the end of 2010. "Global growth has been around 5%, but the fact is that it started with very low numbers. Some countries, such as China, India and Paraguay, have grown more than 10%. Latin America, Africa, Russia and Northern Europe are seeing a growth of 3-5%. Central Europe, the US and Australia are between 0-3%, while others, such as Spain, have grown less than 0%." According to Toribio, citing data from the International Monetary Fund (IMF), worldwide growth in 2011 is expected to be about 4.4% and then continue along that same path in 2012, at around 4.5%.