March 3, 2021

The ECB assures that Spain is the Eurozone country that spent the least to face the covid crisis




Spain is the country in the euro area that has spent the least in relation to its gross domestic product (GDP) to face the crisis that has unleashed the coronavirus pandemic. Thus, Spain, which suffered a contraction in activity of 11% in 2020, would have been the least generous in the fiscal effort made to support the economy. The The amount of the stimulus package amounted to 1.3% of GDP, not only below the Eurozone average – where it was slightly above 4%– but even below that assumed during the 2009 financial crisis, when it reached 2.5% of GDP, according to the European Central Bank (ECB) with data from the European Commission.

The percentage of the aid package in our country would be lower than France’s spending, which reaches 3%; that of Germany, which exceeds 4.5%; or that of Italy, which is almost 5.5% of GDP.

The authors of the ECB article point out that Spain’s spending in this crisis represents 1.3% of GDP and not the 5.5% figure provided by the Government, due to the heterogeneity in the way of reporting on the measures. In some states “the EC calculations differ from those of the national authorities, especially in the expenditure related to work programs related to reduced hours or ERTE”, according to the article.

Likewise, those responsible for the study point out the different treatment applied to the deferral of taxes and social contributions by the countries They point out that the impact of the fiscal measures adopted could have been even greater in several countries than that evaluated by the Commission, given that the evaluated programs were prepared before the second wave of the pandemic in the fall, which generated additional efforts.

In the comparison carried out by the ECB with the fiscal response of the countries to the 2009 crisis, taking as a reference the figures of the European Commission, only Spain and Luxembourg would have undertaken a lesser effort in 2020 than then, while the average of the euro area exceeded 4% in 2020, compared to 1.5% of the GDP destined in 2009.

Liquidity support

In addition to direct fiscal effort through discretionary spending measures, the ECB highlights the liquidity support provided by eurozone governments in 2020, mainly through loan guarantees to companies affected by the restrictions, which in the whole of the Eurozone reached 16% of GDP. In the case of the euro economies, Italy, with more than 30% and Germany with almost 20%, are the countries that provided the most support through these instruments to companies, ahead of France and Spain, with a close effort at 15% each.

“The effectiveness of the schemes depends on certain design characteristics that determine whether borrowers can access loans quickly and that differ significantly between countries,” warned the authors of the article.

They also recall that in previous crises these guarantees were shown to have a positive effect on loans, but also some possible negative incentive effects, although they consider these “less likely under current circumstances.

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