More pressure for the Government to approve direct aid to companies. This time from the Bank of Spain. Governor Pablo Hernández de Cos has insisted in an act at the Autonomous University of Madrid on the need to maintain an expansive fiscal policy to avoid insolvencies, but also to guarantee that the health-economic crisis turns into a financial one.
“One of the most worrying aspects derived from the persistence of the crisis is the risk that the initial liquidity problems of the most affected non-financial companies will turn into solvency problems. In the event that they materialize, these solvency problems would not only cause a destruction of the productive fabric and employment, but would also end up affecting the resilience of the banking sector, which could respond with a credit restriction that would feed back the negative effects on resilience and on medium-term economic growth ”. These have been the words of the governor, which although they were framed within the framework of the euro zone, also represent an implicit warning for Spain.
De Cos stressed the importance of maintaining «a high degree of monetary accommodation so that fiscal policy can, in turn, continue to maintain a very high degree of support for the economy in the euro area until a recovery is guaranteed solid ”. In other words, that a “complementary action of the monetary and fiscal policies” is essential, something on which the governor – and the Banco Central European (ECB)– on several occasions.
The head of the supervisory institution has highlighted fiscal policy as a “particularly effective” element in dealing with the vicious cycles of the crisis. Giving aid to companies would alleviate the problems of over-indebtedness of viable companies, “Which would facilitate their survival and a more expansive behavior of investment and employment in the recovery.”
These aids that the Bank of Spain They would also be aimed at avoiding a credit tightening once the pandemic is over. And the institution adds, on the euro zone, “which, surely, will require the proper functioning of the credit channel, so relevant in European economies.”
Aid not yet specified
The governor’s speech comes in full uncertainty about the direct aid that the Government plans to approve. The president of the Executive, Pedro Sánchez, announced last week in the Congress of Deputies that he will carry out financial support for companies by 11 billion euros.
For the moment, The Moncloa It has barely revealed anything about the aid instruments for the productive fabric. On the one hand, it is on the table to act on the credits guaranteed by the ICO with debt reliefs and their conversion into participative loans, and on the other the expected direct transfers as in France, as well as tax advantages. This last option was revealed yesterday in Minister council by the Minister of Finance and Government Spokesperson María Jesús Montero. The details, and the probe balloons, arrive by dropper.