Spain braces for impact of monetary 'hibernation' to fight virus
31 March, 2020
Spain, already fighting high unemployment and debt, is bracing for the impact of the government's decision to place the country's economy into "hibernation" to fight the spread of coronavirus.
Grappling with Europe's second-worst outbreak of the disease after Italy, the government on March 14 imposed a lockdown and on Sunday it went even more, banning all non-essential work for two weeks in the nation of around 47 million people.
The measure targeted especially the construction and manufacturing sectors, such as for example Airbus that was forced to avoid production in Spain.
Speaking after the cabinet approved your choice to impose the work ban, Budget Minister Maria Jesus Montero said this financial "hibernation" was needed to fight the pandemic which includes up to now claimed 7,340 lives in Spain.
Spain's main business lobby group, the CEOE, immediately warned of an "unprecedented impact on the Spanish economy".
The eurozone's fourth-largest economy had been largely at a standstill as a result of lockdown, with production in Spain's car plants already halted for instance.
Spanish bank BBVA had already forecast the country's monetary output would drop by around 4.0 percent before this new measure, that ought to not result in "big changes" in its monetary outlook, said Nuno Fernandes, an economist at the IESE business school.
However in a country where practically one in three personnel was unemployed at the height of its economic crisis in 2013, but still had the eurozone's second highest unemployment rate -- 14 percent -- after Greece, anxiety is mounting.
Half of most Spaniards fear losing their job as a result of the outbreak, according to a recently available survey published in the daily El Pais.
Job loss fears
Prime Minister Pedro Sanchez's leftist government on Friday banned job dismissals through the pandemic, a step demanded by unions which warned that up to 1 million people risked losing their jobs.
"If there are not revenues but there are expenses and we can not fire... the only choice left is to close," the head of the country's main business group, Antonio Garamedi, said Monday throughout a radio interview.
The federal government had pledged up to 100 billion euros ($111 billion) for loan guarantees to businesses to cushion the economy from the damage due to the pandemic.
But the business lobby group predicts 300,000 jobs could possibly be lost if the crisis lasts over a month, especially in hotels, travel agencies and the textile sector.
"Spain is a country where, if financial activity stops, more jobs are destroyed than in other countries," said Pedro Aznar of the ESADE business school.
This is because nearly 30 percent of all workers have non permanent contracts, the best rate in Europe, especially in the main element tourism sector, and a 2012 labor market reform managed to get easier and less costly to fire workers, he added.
'Fewer resources'
The tourism sector, which makes up about around 12 percent of Spain's GDP, has been especially hard hit by the pandemic.
The UN World Tourism Organization predicted Friday that international travel will likely fall by 20 to 30 percent this year as a result of disease.
The global recession, that your virus will spark may also hit car sales, more bad news for Spain, Europe's second-biggest car producer after Germany.
With companies stopping their activity, "tax revenues will be very bad and the federal government could have fewer resources although it could have more expenses," Aznar said.
He said this explains why Sanchez "insists so much" on a proposal created by Spain and eight other EU member states that the bloc borrow money to finance the fight coronavirus by issuing joint "coronabonds", he added.
Germany and the Netherlands have opposed the idea.
Spain has much less margin to maneuver now than it did when the global finance crisis struck in 2008.
The country's public debt currently stands at over 95 percent of its economical output, compared with significantly less than 37 percent in 2007.
Source: www.thejakartapost.com
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