The softening of EU fiscal rules to mitigate the impact of the pandemic on Spanish businesses may lead to a massive deficit in two years time if not responsibly handled by the government, an industry representative has warned in an interview, EURACTIV’s partner EuroEFE reports.
“Relaxing fiscal rules does not mean an ‘open bar’, because we may have to face a €70 billion hole in 2023”, Antonio Garamendi, head of the Spanish Confederation of Business Organisations (CEOE) told Spanish business daily Cinco Días on Monday.
The CEOE is concentrating efforts on easing the financial situation of entrepreneurs and workers, Garamendi said, with a main focus on Spain’s most profitable sectors, tourism and services, which account for some 12.4% of the country’s GDP.
The €140 billion from the EU recovery fund would be “useless”, Garamendi said, if it is not accompanied with rapid structural reforms required for the digitalisation of Spain’s economy.
Garamendi warned the government that the relaxation of EU fiscal spending rules during the pandemic only applies to “extraordinary expenses,” to help firms liquidity and save jobs, not “ordinary” ones such as raising civil servants’ salaries. If this is not respected, austerity would have to return from 2023, he said.
From liquidity problems to solvency problems
“At the beginning of the [COVID-19] health crisis, all companies had a liquidity problem and that was solved with the ERTE [temporary furlough schemes] and ICO credits [public loans to boost the economy]. But after those first three months with liquidity problems, we moved on to a solvency problem”, Garamendi said.
This was particularly the case with the tourism sector, with Garamendi saying it had gone from “lend me the money and I will pay you back in three months” to “do not lend me anything because I cannot pay you back.”
Around 70% of the 900,000 employees currently on Spain’s ERTE scheme have jobs in hotels, bars, industrial laundries, nightlife and the transport sector.
“That is why we are now asking for direct aid, especially to these sectors. We will have to see how they are granted and to which activities they are given, but it is the solution”, Garamendi said.
[Edited by Paula Kenny, Daniel Eck and Josie Le Blond]