Spain releases the third stimulus to help its battered economy

Spain releases the third stimulus to help its battered economy

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

The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.