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Spain releases the third stimulus to help its battered economy

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Miguel A. Rodriguez
Miguel A. Rodriguez
14 September 2020
Fifty billion EUR to boost solvency.

As the world emerges from lockdown, even though the economies are back in motion, they need a little boost in the form of a stimulus packages. Spain has been doing so since mid-June and is now preparing to release another stimulus package.  

Since the pandemic started, Spain has been one of the hardest-hit countries, alongside Italy. As it imposed a lockdown to curb the spread of the novel virus, various sectors have been battered, especially car sales and tourism. At that time, Prime Minister Pedro Sanchez announced an aid plan worth 3.75 billion EUR to help the car industry. The automotive sector is one of Spain's economic pillars – the second European manufacturer after Germany. It also represents a tenth of the country’s GDP, a fifth of exports, and it employs around two million people. 

The plan included money for renewal of the car fleets, which represents a transition to electric vehicles, in line with the government's goal of being emission-free by 2040. Moreover, research, innovation, and tax incentives will happen to make the sector more competitive.

The second stimulus package was meant to help the tourism industry, making up for 12% of the country's GDP. For this sector, 4.25 billion EUR has been allocated, from which 2.5 billion represents a state loan guarantee program made for companies in the tourism industry. A couple of millions for cleaning and safety measures meant to keep tourists safe from infection. Another 859 million EUR worth of loans has been allocated for digitalization, modernization, and switching to renewable energy. At that time, more than 147,000 companies in the tourism sector took advantage of the program.

Now, another stimulus package is to be approved in an extraordinary cabinet meeting today. The country will put out 50 billion EUR meant to boost companies' solvency in order to revive the economy. A 10 billion EUR fund will be implemented to potentially bail out companies from "strategic sectors." The measure is part of a larger plan, which includes a tax reform focused on increasing taxes on larger companies. After in March, the government approved a 100 billion EUR state-backed credit line meant to support small and medium-sized companies, self-employed people.

The stimulus comes when EU members are still divided over the value of loans or grants previously agreed on, and if the program should last two or three years. From Sanchez's point of view, the program should last four years. 

On July 16, he will meet with his Dutch counterpart, Mark Rutte, to address the fund approval. 

At the moment, the Spanish benchmark, Spain35, is trading lower by more than 0.70%.

Read more on how countries are facing the pandemic’s effects on CAPEX.com!

Sources: reuters.com, thelocal.es, thechronicleherald.ca, economictimes.indiatimes.com

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.