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Spanish Congress Approves Coronavirus Recovery Programs

Lawmakers back measures for the economy, EU and health care.

Nick Ottens

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Nick Ottens
Spanish parliament Madrid
The Palacio de las Cortes, seat of the Spanish Congress of Deputies, in Madrid, August 16, 2017 (Shutterstock/Vivvi Smak)

The Spanish Congress has approved three out of four recovery programs proposed by Prime Minister Pedro Sánchez, whose left-wing government does not have a majority.

Right-wing and regional parties supported plans for the economy, EU and health care. A package of social reforms, which included rental protections, a basic minimum wage and measures against gender violence, fell four votes short.

The government could reintroduce those proposals in its 2021 budget.

Economy

Economic measures, many of which have the support of business leaders and trade unions, include:

  • €40 billion in loans to companies to digitize their services.
  • €16 billion in support for regional governments, €9 billion of which will go to health care.
  • €10 billion in support for non-financial companies.

The European Commission projects the Spanish economy will shrink 11 percent this year and grow 7 percent next year.

  • €216 million in loans for the digitalization of tourism.
  • €50 million in subsidies for the development of rural and inland tourism.
  • One-year moratorium on mortgage payments for tourist properties.

Tourism accounted for one-sixth of Spain’s economic output last year but has virtually come to a standstill as a result of COVID-19.

  • Extension of the short-time work scheme ERTE (similar to Germany’s Kurzarbeit) until the end of September.

Unemployment is 14 percent. Without ERTE, it would be in the range of 30 percent.

  • €250 million in subsidies for new car purchases to reduce pollution.
  • Investments in renewable energy in line with the European Green Deal as well as strategies to improve water (re)use.
  • “Progressive and equitable” tax reforms, which will need to be filled in by the government. A pollution tax is likely.

Air pollution in Barcelona and Madrid exceeds European limits. Taxation is tilted toward labor income, which, according to the OECD, penalizes employment and growth.

EU

Lawmakers expressed support for various initiatives taken or proposed by the European Commission, including an EU-wide unemployment insurance system, a European deposit insurance to complete the banking union and eliminating remaining barriers in the single market.

There are few restrictions on trade in goods in Europe, but offering commercial services across national borders can be complicated by regulatory discrepancies.

Spain could receive up to €140 billion in grants and loans from the €750 billion coronavirus recovery fund EU leaders negotiated this weekend.

At the insistence of Northern European countries, recipients will have to implement economic reforms recommended by the European Commission to qualify.

In the past, the commission has advised Spain to:

  • Harmonize regulations between its autonomous regions.
  • Reduce public- and private-sector debts.
  • Simplify income support schemes and family benefits.
  • Shift more workers from temporary into open-ended contracts.

The first two will be difficult. Sánchez relies on the support of Basque and Catalan nationalist parties for his majority in Congress. They will resist reforms that reek of centralization. Reducing debts at a time of economic contraction is a tall order.

The last two are more realistic — and urgent. Spaniards don’t always know for which benefits they qualify and Spanish bureaucracy doesn’t always help. Even before the pandemic, only half of Spaniards under the age of 30 had a job. Of those, many were in part-time work.

The current government is unlikely to make it easier for companies to hire and fire workers. Indeed, it reversed some of the liberalizations of the last, right-wing government. But it could — with right-wing support — lift regulations that stifle labor mobility. For example, many regions demand permanent residency for workers to qualify for job training, which is one reason unemployment is almost double the rate in historically backward Andalusia and Extremadura than in wealthy Catalonia and the region around Madrid.

Although such reforms could be opposed by the Basques and Catalans, and Sánchez is already testing their loyalty by doing deals with the center-right and postponing talks on giving Catalonia more autonomy, not less.

Health care

Most parties agree health-care workers deserve better job security and higher pay.

The health-care plan approved by Congress also calls for:

  • Improving community care and coordination between health- and social-care systems.
  • Scaling up epidemiological surveillance.
  • A national strategy for digital health care.
  • A comprehensive plan to deal with another pandemic or a second wave of COVID-19.

Spain has the highest number of confirmed coronavirus cases in the EU — 313,000 as of Tuesday — although Italy and France have lost more patients to the disease: 35,000 and 30,000, respectively, against 28,000 in Spain.

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