No one has the compass that points the way back to pre-pandemic income and employment levels
No one has the compass that points the way back to pre-pandemic income and employment levels. Nobody. And be wary of whoever claims to have it. According to the OECD, Spain will have to wait until 2023 for this to happen, assuming there are no setbacks or unforeseen events. But, it is not known for sure. What is happening to us is so far from conventional economic knowledge that ready-made recipes are useless, most manuals can be thrown away and all the countries and multilateral organizations in the world are making their way as they go. And I am referring to a disruptive pandemic that limits, for health reasons, the mobility and consumption of people, but also the associated acceleration of the digitization of the economy and social relations that has made us travel in five months, the road of five years.
After the pandemic, we hope that already in 2021, we will go out to a new territory, largely unexplored, for which we can already draw some features that resemble a sketch of a map whose physiognomy will depend a lot on the decisions we make now and, in What is the answer to the following questions? Will there be a third wave of the pandemic in the first quarter of next year, as virulent as the second, which already causes more deaths in Europe than the first? It will depend on what happens with the application of sanitary measures compatible with “saving Christmas” which has become a repeated mantra from all political spectra.
It is quite evident that the intensity of the second wave has been closely related to a premature and too rapid de-escalation after the confinement to which the first wave took us. Will the same thing happen now? By “saving Christmas” we will put the recovery at risk or, at the very least, will we delay it for a few months, also increasing the death toll? ¿ Long will it take the vaccine to end the pandemic?
Assuming that any of the existing vaccines are fully effective and the mass vaccination campaigns are carried out without problems, it is difficult that before the summer we have reached such a situation of immunity that allows Spain to be declared a territory free of the pandemic. Does this raise a fundamental question: how many of the 60 million tourists who have stopped visiting us during 2020will dare to come in 2021? Even if we share the criticisms regarding the excessive dependence that our economy has on tourism and related activities (hospitality, leisure, transport), which is not my case, we will have to recognize that any alternative to this model will go well beyond the next year where, still, the number of tourists who visit us will be a key variable for our economic performance.
How many companies will have endured the pandemic? At this time, beyond those that have already closed permanently, we have 350,000 freelancers who survive thanks to extraordinary aid and more than a million workers in ERTES or cessation of activity. The Bank of Spain estimates that up to 20% of companies will go into insolvency in 2021 and a half will end up closing if there are no changes. Everyone, including the IMF, insists on the need to go beyond the emergency aid launched at the beginning of the pandemic if we want to avoid a sharp increase in bankruptcies and layoffs given the long duration of this exceptional situation. Everyone, except the Government, for now. Specifically, It is requested to arbitrate new direct aid to companies in the sectors most affected by the mobility limitation, as other European countries such as Germany have done. If these new aids are implemented, we will save a greater part of our productive fabric, but, in return, we will have a greater public deficit than the already high 8% of GDP foreseen in the Budgets.
How quickly will citizens get back to boosting economic growth with our spending? The consumption of Spanish families represents around 60% of GDP, which is why that saving has reached historical rates higher than 22% of their disposable income is only understood by the pandemic, and this, in turn, explains a fall in GDP, no less historic, of 11.8%. Without serious alterations in income, citizens will transfer savings to consumption as sanitary restrictions soften, in parallel with the advance of the vaccine, depending on their fears about the definitive overcoming of the pandemic and depending on the number of companies that have gone bankrupt and ERTES that end in ERES.
¿ What will happen to the European Recovery Funds? It is almost impossible that we will be able to execute in 2021 the 27,000 million euros foreseen by the Government in the Budgets, coming from the European Funds for Recovery. As much as the new Decree-Law soon to be approved, accelerates the bureaucratic procedures and the processing of projects, among some things and others we can aspire to commit that amount, but it is hardly expected that even half can be spent throughout the year next. And that would already be a success.
Spain has been the OECD country where the pandemic has hit the economy the most, as it is a country highly dependent on sectors that live off personal mobility (services) and one of the countries where public support measures have been the least in relation to GDP, as a consequence of a State weakened by austerity policies and insufficient fiscal policies. If, in addition, everything indicates that it will be one of the countries that take the longest to recover, it is not risky to conclude that social inequalities, still without closing the gaps opened by the previous crises of 2008 (financial) and 2010/11 (of the euro), will be widened again, despite the pretty government slogan of leaving no one behind.
The expression of “jobless” is beginning to be coined for those young people who have engaged in both crises and still do not know the work experience, or as precarious. In parallel, there is the fear of accelerated digital automation that leaves many adult workers in the gutter without adequate preparation. The “social shields” (a word that refers to a mental framework far removed from social democracy) of the Government are full of cracks or so loaded with bureaucratic requirements that very few can lift them to protect themselves.
Faced with so many unanswered questions, the approval of the Budgets has more political value than economic value: it augurs a long term that will put an end to the period of parliamentary instability that began in 2014. What will not put an end to is the front politics that accentuates so much polarization of the country at a time when the transversal unit should be much more than an empty signifier. In the end, those who have internalized the end of bipartisanship the most have been the two majority parties in the hemicycle, which are trapped in Goya’s famous painting ‘Duel with punches’ so as not to lose votes to their right or left, respectively. Politics, then, is marked today by the extremes of the parliamentary arc and this also affects economic performance in the form of added uncertainty.