Spain – Facing a huge debt crisis

Oct 8, 2020

pic: Karim Manjra @karim_manjra

Spanish Prime Minister Pedro Sánchez announced yesterday from the Moncloa Palace in Madrid the so-called ‘Plan for the Recovery, Transformation and Resilience of the Spanish Economy’.

This plan will (apparently) create 800,000 jobs to revive the Spanish economy after the COVID-19 pandemic.

Based in four pillars (ecological transition, social and territorial cohesion, digital transition and gender equality) the plan will take EUR 25 billion from the EU’s coronavirus recovery fund. Note that Spain will receive a total of EUR 140 billion (second-largest recipient of funds).

Spanish PM pointed out that the world has changed and therefore Spain “not only has to move forward but also has to transform itself (…) It is an opportunity to transform and modernise our country”. He also unveiled a monetary injection of EUR 72 billion during the following three years.

Worst scenario coming soon…

Until the new Budget designed by PM Pedro Sánchez and his government gets approved, Spain will continue to depend on the public accounts approved during Mariano Rajoy’s government.

This new Budget raises the debt ceiling by 53% reaching almost EUR 200 billion and Public debt will exceed 118%. The recession will be worst than expected as the government itself has worsened it’s forecast and Spain’s GDP will fall by 11.3% vs. 9.3% (expected).

Spain is the fourth-largest economy in the eurozone but the unemployment rate has increased 2% since January.

Unemployment rate in member states of the European Union in July 2020
(seasonally adjusted)

– Greece 18.3%
– Spain 15.8%
– Italy 9.7%
– Sweden 9.4%
– Euro area 7.9%
– Netherlands 4.5%
– Germany 4.4%
– Poland 3.2%
– Czech Republic 2.7%
source: Statista2020

While Italy and France presented their plans in September and Germany did the same last June, Spain still hasn’t requested from Bussels the correspond funds for the tourism industry, one of the pillars of the Spanish economy which represents almost 15% of the country’s GDP.

Spain currently holds the most new infections rate in Europe and government has imposed recently a partial closure of Madrid.

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