María Gómez Agustín: Before an unknown scenario


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Europe is overwhelmed. The European Center for Disease Control has warned that the coronavirus is spreading across the continent. Both the European Union / European Economic Area like the UK they are moving rapidly towards a scenario of widespread transmission of the Covid-19. This situation, unprecedented in developed countries since the Spanish flu epidemic in 1918, raises the need to adapt to a scenario whose evolution and economic, health and social consequences are difficult to foresee.

Measures are being taken in all the governments of European countries to try to alleviate the situation. In this same line, the intervention of the President of the Government of Spain last Thursday is framed. The chief executive has raised

a package of initiatives that can be summarized as follows: inject spending into a healthcare that is already on the way to collapse (1,000 million to the Ministry of Health and 2,800 million to the autonomous communities) and delay the payment of taxes to the "sectors and groups directly affected by Covid-19" (14,000 million). These actions are undoubtedly well-intentioned but are clearly insufficient to address the serious situation facing Spain.

It has not been taken into account that an epidemic of these characteristics has systemic effects and, therefore, the strategy to tackle it must be global and all-encompassing. In economics there are no watertight compartments. The vast majority of sectors are interrelated and, consequently, the economic impact of the crisis generated by the Covid-19 It will extend to the whole of the economic activity of our country: an inevitable domino effect. Spain is doomed to a recession in 2020 and there is a risk of settling in a scenario of long stagnation if a program capable of alleviating the contractive impact of the coronavirus and creating the conditions for it to be as short-lived as possible when the epidemic hits is not articulated. to its end.

In this context, what to do is as important as what not to do. Regarding this aspect, it is essential to highlight two basic ideas. First, any increase in corporate taxation or market rigidities will only serve to aggravate the depressive shock on the economy derived from the Covid-19; Second, as experience shows, actions similar to those of Plan E serve nothing other than to aggravate the delicate financial position of the Public Administrations. Any spending initiative must focus on strengthen health care infrastructure.

In the face of a supply shock, it is vital to reduce the fiscal, regulatory and social costs borne by companies, as well as increase internal flexibility to adapt to the environment. If these adjustment mechanisms are not provided, this will result in a drastic fall in production and employment. In parallel, it is essential to create a system of guarantees guaranteed by the State that provides temporary liquidity to creditworthy companies to avoid a "credit crunch" and an escalation of delinquencies that leads to bankruptcy of a large part of the business fabric and leads to the banking system. to an unsustainable scenario.

If a plan is not applied within these coordinates, the Spanish economy has serious possibilities of entering a contractionary dynamic worse than that which occurred in the period 2008-2013. Its macroeconomic conditions are much worse than then, the markets are still very rigid, the unemployment rate is very bulky ... This is the reality and minimizing its threats is an exercise in irresponsibility. In a national emergency scenario it is necessary to join efforts but also to indicate if the response to it is adequate. This is the responsibility of this hour and knowing how to approach it with intelligence and speed depends on the future of Spain.

María Gómez Agustín is CEO of Freemarket

María Gómez AgustínMaría Gómez Agustín

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