A Different Normal

The potential for the Spanish economy to emerge stronger from the pandemic is real and contingent upon strategic high-tech investments with green credentials. Indeed, the IMF in April revised its 2021 GDP forecast for Spain to a 6.4% climb, one of the steepest rises among developed economies. This puts Spain ahead of France (5.%), Italy (4.2%) and Germany (3.%), with further growth of 4.7% projected for 2022. Such expectations have honed the government’s choice of mechanisms to best position the economy in the new global landscape.

In a TBY interview, Iñigo Fernández de Mesa, the Vice President of CEOE, President of IEE, and former Secretary of State noted an inherent flaw in political thinking that should now be rectified. “Spain,“ he suggests, “normally spends all the money it generates in buoyant times, [whereby] the country does not have enough resources to support the private sector during crises. As a result, other European countries have been able to provide more assistance to their respective private sectors. This is a lesson that we must learn [in order to] save funds that will later help us cope with recessions.“
According to Prime Minister Pedro Sanchez, Spain’s USD84-billion economic recovery plan is all about a different approach to growth—an opportunity for a reset, yes, but of a sustainable strain. The three-year plan rests on, among other considerations, a green transition that champions clean vehicles and renewable energy, while reaping the efficiencies of digitalization. By the numbers, over the coming three years, the government aims to distribute 39% of received funds to ecological transition, 29% to digitalization, 10.5% to education, and 7% to investigation and development. The PM sees the potential to generate 800,000 jobs over those three years. It helps, too, that Spain, having suffered heavily from the pandemic, is eligible for a historic high EUR140 billion in EU recovery funds.

Corporate lifeline

One palliative eagerly swallowed by numerous governments around the world has been the furlough system designed to stem job haemorrhaging in key sectors. Spain’s ERTE furlough facility has been extended to September 30 to better support the roughly 600,000 workers reliant upon it. The price tag? EUR3.4 billion in public funds. Yet, according to de Mesa, this makes sound economic sense because while, “the real cost [of ERTE] is about EUR1 billion, […] for the government the ERTE temporary layoff mechanism is cheaper than the ERE, which is the traditional layoff regulation in Spain.“ He qualifies that claim by saying that “[while] ERTE has been helpful in avoiding bankruptcies […] it should not be renegotiated every two or three months, as it has been the case.“
Meanwhile, many Spanish firms have also opted to lending their way out of the morass. Angel Asensio, President of the Madrid Chamber of Commerce, Industry, and Services, maintains that “it is crucial to extend the loan period for some of the government-sponsored loans [whereby] loans that have to be repaid within five years should be extended by two years.“

Diversification alley

Overall, Spain is set to invest 68% of its slice of the EU’s post-pandemic recovery pie in transitioning toward an ecological and digital paradigm to the tune of EUR70 billion. And with the economic staple of tourism battered by the pandemic, a more-diversified economy is a no-brainer. One such ambition foresees Spain growing into Europe’s preeminent multimedia hub. The theme continues with the government’s goal of also becoming the continent’s hydrogen hub. This is examined elsewhere in the book, with green hydrogen technology being among the government’s key investments and hydrogen set to become the primary land transport fuel by 2050.

Taking it abroad

Casting a wider net is also among Spain’s commercial objectives, as outlined by Xiana Margarida Méndez Bértolo, the Secretary of State for Trade and President of ICEX España Exportación e Inversiones. She told TBY that with internationalization being a key tenet of the economic strategy, “our plans form part of a 10-year strategy called Strategy for Internationalization of the Spanish Economy 2017-2027 [involving] a battery of measures for all organizations and departments with actions in promoting internationalization to work in a co-ordinated and efficient manner, taking advantage of potential synergies and involving the private sector in the execution of the plan.“

The good news here is that the “export sector has already fully recovered to its pre-pandemic level of activity.“ The initiative, however, depends on getting the dynamic right at home first. To this end, Spain is pursuing the Domestic Trade Plan 2021- 2023 predicated upon the key areas of digitalization, social and environmental sustainability, governance and competitiveness, capacity building, training and information, and recovering consumer confidence and awareness. Having suffered heavily in the COVID 19-era, Spain is determined to create a new, greener, and less fair-weather economy.