Spain to receive huge financial aid from EU
Spain was allocated €140 billion from the EU Coronavirus Recovery Fund at a summit in Brussels on July 21st, 2020. The Spanish Prime Minister Pedro Sanchez was understandably gracious about this positive step towards overcoming the challenges the economy faces due to the worldwide pandemic. Second, only to Italy in the size of monetary aid from this historic fund, the help will be given in the form of grants in the amount of €72.7 billion, which will never have to be repaid and the balance of monies in low-interest loans.
Where the investment money is coming from…
The money will be allocated over six years and has been provided and agreed by the 27 countries of the European Union, who decided on the scale of aid for each recipient member. The fund itself totals €750 billion, which is broken up into grants of €390 billion and loans of €360 billion. History is being made by the fact that the bloc will conjointly borrow on international markets to invest in this incentive project. This will actively stimulate the country’s recovery.
In real terms the appropriated sum is equal to 11.2% of Spain’s 2019 GDP and with the economy predicted to shrink by approximately 10% during 2020, this is hugely welcome news.
Spikes affecting tourism
A very strict Spanish lockdown, ever-changing quarantine rules in other countries, for returning tourists, together with spikes in the infection rates in various regions, are making this a precarious year for businesses relying on income from tourism. Thus the agreed grants and low-interest loans will go some way to helping the country as a whole.
Such aid usually comes with conditional terms but these were not divulged by President Sanchez after the summit. The pension system in Spain is likely to be one of the areas affected. However any speculation about whether Spain would be likely to go ahead with any necessary reforms within the labor or pension systems was weakened when the Prime Minister firmly professed that ‘the agenda of the Spanish government is aligned with that of the European Commission.” As might be expected, to satisfy the countries within the European Union, who were not enamoured with the idea of issuing grants, rather than repayable advances, such monies would only be granted on the proviso of a satisfactory proposal of expenditure given by the recipients.
The Spanish government has however indicated that the conditions attached to the money it is receiving from the EU Coronavirus Recovery Fund could cause them to rescind their promise to abolish some or all of the contentious 2012 labor reforms which gave more compliance within the job sector.
Election manifestos may have to be put aside amid the immediate economic crisis caused by the impact of the Covid 19 pandemic while the country faces managing any localised spikes to prevent a widespread surge during the winter months. Just like all the other countries in Europe. Thus, the EU are united in both an economic and health mission, to beat this virus, in every way possible.