At 3:30 p.m. on March 17, the Spanish Prime Minister (Pedro Sánchez) announced an impressive package of economic measures. These measures mainly support families, self-employed workers and Spanish companies, respectively. In other words, the Spanish government will “mobilize” 200,000 million euros (16% of the GDP) to help contain the devastating effects that the spread of COVID-19 will have on the Spanish economy. 117,000 million euros of this 200 will come from the public sector (mainly through guarantees). The rest of the money, on the contrary, will come from the private sector.
Due to the circumstances, these measures have a strong social component, since they support, both directly and indirectly, the most vulnerable families, SMEs and freelancers. This way, many jobs could be maintained. Some of the measures that have been approved to make this posible are:
- Moratorium on mortgage payments for those who lose their jobs.
- Protection of basic supplies (electricity, water and gas) and telecommunications services.
- Flexibilization of the RTERs (Record of Temporary Employment Regulation). Those affected by the situation will be paid for their unemployment without this period counting as time spent.
- Suppression of the payment of Social Security contributions in order to avoid worker dismissals.
- Promotion of teleworking and reduction of working hours.
- In cases of economic difficulty, self-employed workers will be able to cease their activity and receive their benefits. In some cases, they can also be exempted from Social Security payments.
Furthermore, the government “shields” strategic sectors such as banking, telecommunications, infrastructure, transport and energy. They do so by prohibiting the OPAs for listed companies from potential non-European buyers and imposing de facto “golden share” on the major IBEX 35 companies. Although some media have described these measures as “stimuli,” they are really “containment” measures. They are not different from those taken in countries like the US or in the rest of the EU (with a total of $1 billion in aid through guarantees.)
As far as SMEs and self-employed workers are concerned, the government has approved a series of financial measures (besides the measures aimed to maintain their workers). The most relevant one is the granting of 100,000 million euros in guarantees to financial institutions so that they can renew loans and provide new financing to companies. It remains to be determined which part of these guarantees will be granted by the ICO or directly by the State. If they were structured like the recent line of400 million euros that the ICO granted to the Tourism and Related Activities sector, the guarantees would cover 50% of the arrears that could be derived from such loans. This is what would explain the afore mentioned “mobilization” of 200,000 million euros. The banks and other financial entities can grant funding for that amount, having half of it covered by the state in the form of guarantees and the so-called “shared risk” schemes. Moreover, the role of non-banking entities, such as debt funds, are still to be defined.
Additionally, another specific line has been approved for internationalized companies and for those which have more than 33% of their business outside Spain. This line consists of a line of guarantees for 2,000 million euros and a program to facilitate teleworking and to support digitalization and investments in R&D.
In conclusion, the Spanish government’s measures are aimed to solve the most pressing problem at the moment: the protection of the basic needs and employment of Spanish families (Donald Trump has even proposed to pay for a check for every American affected by the virus). On the contrary, the SMEs depend on the Banks. Banks should be able to refinance or grant new financing to companies through ICO’s mediation lines with the guarantees and warranties offered by the government.