what Spain is playing in the EU

Crises open opportunities, said Albert Einstein. And the challenge is whether the chiaroscuro of the crises will illuminate monsters or a better country. Spain is the country hardest hit in the European Union by the health and economic crisis. The medical data on the incidence of the coronavirus say so, which has placed Spain at the forefront since the beginning of the pandemic. And the economic data say so, which has also placed Spain among those that will suffer the most recession and unemployment as a result of the coronavirus. Added to all this is uncertainty about how Brexit will end, with a trade agreement or not. The next few weeks are key to closing the deal or for everything to blow up …

The pandemic places Spain at the forefront of unemployment and economic disaster in the EU

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Spain, according to the figures provided by the Government to the European Commission in its Budget Plan delivered this Thursday, has allocated 200,000 million to the coronavirus crisis, including ERTE, guarantees to companies and transfers to the autonomous communities.

But the European money has not yet started to arrive.

“We have to get something out that is historical,” explains a community source, “we must not forget that the July decision of the EU leaders is a historical decision that is unprecedented and that it is probably one of the most important things that the European Union has made since its foundation. It is a paradigm shift in many ways and a leap in an integration model that for Spain and for many European citizens was a goal of many years ago. ”

At the end of this month, the debt issuance by the European Commission is expected to begin to launch the SURE program to finance ERTEs. Spain has awarded 21,300 million in soft loans, and it is expected that in the coming weeks a third part, about 7,000 million, may arrive.

The Spanish Government’s commitment to ERTEs has been key to sustaining a drain on employment, and even so the year will close at around 17% unemployment. But what if you couldn’t even count on those 21.3 billion?

Spain is not only playing to prolong the ERTE. Spain has before it 140,000 million in three years, 72,000 million in subsidies and 68,000 million in loans. For what? “To take advantage of the crisis to lay the foundations for a more digitized and more sustainable country model,” they explain in the Government.

Complicated negotiations in the European Parliament

The risks? There are many. The first is that after the political agreement of the EU leaders after five days of negotiations in July, the negotiations with the European Parliament are being complicated: the European Parliament asks for more money for key items of the community budget, while the governments do not want increase global ceilings, and requires greater conditionalities in relation to the rule of law, an issue in which the clamp between Hungary and the Netherlands is also operating.

That is to say, there are still days of negotiations, while with each passing day the situation worsens throughout Europe, although parliamentary sources suggest that the negotiations with the European Parliament may already be entering a purely technical area that allows the knots to be undone.

But, once this agreement is produced between the European Commission, the Council – the governments – and the European Parliament, the parliamentary procedure in the 27 will be necessary for an extraordinary operation, which requires creating new taxes and increasing the spending ceilings to issue debt by the European Commission worth 750,000 million euros.

All of that won’t be done in two days.

Then there will be new deadlines: up to eight weeks for the European Commission to assess countries’ reform plans before the last approval from the Council arrives, which can take up to three months for approval. In short: it will be difficult for the money to start arriving before the summer, and the Government has 27,000 million – 25,000 from the recovery plan and 2,000 from the React EU plan of the European Commission – in its 2021 budget plans.

There are two points of difference in GDP growth for the Spanish economy between what is expected or not.

“We have to get a file that is very complex,” explains a diplomatic source, “that citizens are waiting for it. And the European economy and the Spanish economy need it, it depends a lot on it, not only after the crisis is over. macroeconomic general, but the life and well-being of many citizens “.

A regulation that includes debt and deficit limits

Along the way there is another difficulty for Spain, which it has raised in the meetings in Brussels with the rest of the countries: the final regulation of the recovery fund includes the need to respect the fiscal margins under penalty of seeing the arrival of funds cut off . And what does it mean? That countries must comply with the deficit and debt limits established by the European semester – the economic governance mechanism of the European Commission – through the Stability and Growth Pact. Now, that pact has been on hold since the beginning of the pandemic and, Brussels has announced, it will be all in 2021.

The problem may come when you want to reactivate, with countries with runaway deficits and debts, depending on how you are going to reactivate. It will depend on whether or not Brussels can demand more or less economic cuts and adjustments, and in what areas. In the previous crisis, economic sacrifices were decreed in the form of cuts in pensions, social and health services, public employees and investments. For now, the path is being different, but the Spanish Government is awaiting the evolution of this debate.

Spain has not blocked the fund’s regulations, although there is a tightening of the conditions, nor has it blocked compliance with the rule of law, although its approach is so limited that it will allow the Netherlands and Poland to be as iliberales as they are being; just as in the negotiations with the European Parliament, he is on the side of the rotating German presidency, rather than the Socialist rapporteur. Why? Because Spain, these days, is not only playing a large volume of money, but a way out of the crisis different from the previous one and a country model, with the lurking, in addition, of an added uncertainty: Brexit.

The never ending Brexit

On January 31, 2020, the United Kingdom left the EU. And on February 1, a transition period began, in which practically nothing changes, except that the United Kingdom ceases to have a voice and vote, dedicated to the negotiation of the future relationship agreement between the European Union and London.

On Thursday night the 27 pressed the British Prime Minister from Brussels to finish Brexit with the future relationship agreement from January 1, but this Friday Johnson has been forceful: “If the EU does not change, the talks are broken We are ready for the no-deal. ” To get to January 1 with an agreement in force, a pact is necessary in two or three weeks. And what is the scenario of the no agreement? That trade relations, as Johnson likes to say, would be “Australian.” That is to say, governed by the basic rules of the World Trade Organization, without any special advantages typical of someone who has been in the EU for 45 years and with whom there is so much neighborly relationship, centuries-old commercial ties and citizenship among the thousands of Europeans living in the UK and British in the EU.

The lack of a trade agreement would be a blow to the ten countries with the closest relationship with the United Kingdom, including Spain, whose fishing fleet is highly dependent on British waters, and on whose coasts there are thousands of British living seasonally. Furthermore, it could have consequences on the relationship with Gibraltar and on the economic situation of Campo de Gibraltar “.


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