June 14, 2021

The rebound remains in the air due to the 5,600 million hit to close Madrid




The economic disaster is served in Spain in general and the Community of Madrid in particular. The new measures to limit movements and activity in the capital they arrive at a moment of special weakness after the confinement of March, the hardest and longest in Europe. The expected figures are devastating, while the Government has been selling for months that the recovery is here. The “green shoots” -said the socialist Elena Salgado in the previous crisis- are, once again, a mirage.

According to calculations by the Madrid employers’ association (CEIM) to which ABC has had access, the limitations will have a cost in income of 600 million euros per week, which will cut the GDP of the capital by 15% every seven days. In addition, the lost activity, measured in number of hours worked, will be 18%, according to the same calculations.

Daniel Lacalle, chief economist at Tressis, puts figures to the coup at the country level: the national GDP would fall by 0.2% in a scenario of soft closing duration, two weeks, and 0.5% in a more adverse scenario. This places the 15-day loss range between 2,200 and 5,600 million euros. “Madrid involves everything. There is no such thing as a selective impact, “he explains, adding that the added problem is that” the economy comes to this situation with particular fragility. What happens in this autonomy also has its contagion effect on the rest, given the factor of capitality and accumulation of wealth.

Spain, before these restrictions imposed by the Ministry of Health, was already coming from an adverse climate. The collapse of GDP in the second quarter was 17.8% (the initial estimate of the INE was 18.5%); the deficit shot up until August to 56,859 million euros, that is, 588% more than in the same period a year ago; and the IMF has warned this week that recovery is at risk if sprouts are not controlled.

To all this is added that the business fabric faces this second stage of semi-confinement with low defenses. The Bank of Spain, which whenever possible advocates maintain public aid and even increase it, recently warned that around 25% of companies in Spain are already in technical bankruptcy. One in four companies looming over the bankruptcy ravine and lacking the muscle to withstand the stakes of more restrictions.

The self-employed, to the limit

The closure imposed by Health does nothing but “Give the lace” to a multitude of businesses, as collected by Lorenzo Amor, president of ATA, the majority association of the self-employed. Around a million members of this guild are on the wire. «All this embarrassing spectacle of difference of criteria generates enormous uncertainty; It does not only harm Madrid but the entire economy », He says.

According to the calculations of this organization, around 30% of the self-employed in the Community of Madrid will be severely affected by the restrictions. “For many it will imply its closure because they can no longer endure”, details. In fact, ATA recently published a study that 70% of the self-employed would not be able to survive another lockdown. Now the measures are less severe than in March, but the impact on activity is undeniable. «ERTE and the cessation of activity are not a lifesaver; they will cushion the blow but sales will be nil. This is going to be very difficult for them to bear. Everything will depend on how long the restrictions last, ”says Amor.

The main threat now looms over retail and hospitality, according to Ángel de la Fuente, executive director of Fedea. This economist recognizes that the situation is not comparable to that of March, but that there will be businesses that experience a severe blow.

The “we came out stronger” that the Government defends seems to become even a weakness. And the “we are not going to leave anyone behind”, more of the same. Among experts, the feeling is that the measures are excessive. This is what Gregorio Izquierdo, general director of the IEE, points out, who explains that before making decisions, their marginal benefit should be calibrated. And now, it has not been done because, he says, its positive effect will be much more limited than in March. “There were other alternatives only with health effects”, he comments.

For Ana López, professor at the Autonomous University of Madrid and secretary of the governing board of the College of Economists of Madrid, in a scenario of uncontrolled outbreak of coronavirus national GDP will fall by around 12% this year. And in the case of the Community of Madrid, due to its structure, it would do so by 11.7%. As it is, the fact that Spain is a country of micro-SMEs (96% of the business fabric, and 95% in Madrid) does not help repel the perfect storm that has formed over Madrid. «We will attend a second wave of business closures in the Community of Madrid if current economic problems intensify, “he says.

«To recover the regional economy, which has been so hit during the pandemic, it is necessary to stimulate domestic consumption and these types of measures go in the opposite direction, since they generate uncertainty “, comments Ángel Asensio, president of the Madrid Chamber of Commerce. In his opinion, the survival of thousands of companies is at stake with measures of this caliber and points out that other types of actions could be adopted less damaging to the economy and employment. In the balance between health and economy is virtue, as the Minister of Economy recalls so many times, Nadia calviño. At the moment it seems that the balance is irreparably unbalanced.

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