The severe economic destrucion to come
Patrons Column: Will the politicians be capable of listening to the Bank of Spain and of forging a real national strategy that benefits Spaniards?
Tonight the second quarter of 2020 ends. The Bank of Spain has published its annual report, centred exclusively on the economic impact of the coronavirus crisis. And what an impact it is going to be. A hit of up to 15% to annual GDP in the worst scenario. Two years of economic suffering await the country, whichever scenario ends up becoming reality. That will take us to the end of 2022. "The level of economic activity will likely suffer a contraction of a magnitude never before seen in peacetime", wrote the governor, Pablo Hernández de Cos.
The state of alarm has meant "the paralysis of almost all activity across a broad spectrum of industries", says the body. The cost of the crisis "has been extraordinarily high in all areas". The impact will be "very severe". The document announces uncertainty, uncertainty and more uncertainty. No one knows if there will be a new outbreak, although it seems likely, and no one really knows what economic effect the government's emergency anti-coronavirus measures will have in the medium term.
Chief among the worries: jobs and businesses. 5.2 million Spanish workers have already been affected by job losses, temporary lay-off schemes or self-employed workers stopping their activity. The Bank of Spain says the coronavirus fulough plans cannot last forever. This is entirely logical: the underlying work, the creation of added value for sale in some market, is not taking place, so there is no or lower income. 108,000 companies closed in March, April and May, a huge drop. Without companies, of course, there are no jobs in the private sector. Rent, stocks, electricity and all the rest all cost more money in the meantime. How long can they hang on like that?
This new crisis only highlights the structural problems (public accounts, debt, deficit, temporary contracts, productivity, bankruptcy procedures, etc.) that were not fixed last time. The national homework was not done. Special reference should be made to education. The Bank of Spain asks for a deep revision of the national education system given its importance for the economy. Mr. Hernández de Cos says the national response to all of these challenges needs to be "urgent", "ambitious", "across the board", "permanent" and "accelerated". Oh, and with broad cross-party support for the long term. Will the politicians listen to him? Are they capable of responding in the manner the situation requires?
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