IÑIGO FERNÁNDEZ DE MESA

Spain 2021 | ECONOMY | VIP INTERVIEW

TBY talks to Iñigo Fernández de Mesa, Vice President of CEOE, President of the IEE and Former Secretary of State, on EU funding, remote working, and Spanish GDP projections.

Since its establishment in 1977, CEOE has been representing and defending the interests of Spanish businesspeople. What is the main mission of the CEOE and how do you carry it out?

The CEOE represents the Spanish business world. It brings together more than 4,000 business associations and represents some 40 million entrepreneurs. I'd say that the CEOE is the social agent that is recognized for the negotiation of collective bargain agreements. The CEOE also presents opinions before the governments in the decision-making processes that affect private companies.

CEOE has announced that it will choose around 15 projects to use the EU funds. What must these projects have to be selected by CEOE and approved by Brussels?

The number of projects will range between 10 and 18. These projects must have an effect across the economy. It has to impact most of the regions, and have to be projects that meet the criteria of the European Commission. The government has to present a draft by October but the legislation that will govern the recovery fund won't be approved until January 2021. The advantage of having the draft prepared is that the European Commission will already have reviewed it before the funds' approval. EU countries have requested an advance payment equivalent to 10% of the funds that would be allocated and the expectation is to allocate EUR20 billion in recovery. The CEOE believes these funds will help reactivate the Spanish economy. The focus of these funds will be investments that will spur efficiency across the public administration. For example, this could help digitalize the public administration and reduce public spending. These investments can be also focused on human capital and PPPs. In that area, the CEOE has worked with PwC to develop 15 projects that can benefit the Spanish economy as a whole. These projects have to support SMEs, boost digitalization and ecological transition, and modernize the entire Spanish economy. These include initiatives such as the digitalization of SMEs, which can boost exports, for example. Another project is about the development of an infrastructure for electric vehicles across Spain.

Why will this plan be different to the so-called 'Plan-E' approved in response to the 2008 recession by the Zapatero administration?

The government has to present a plan to the EU, and we have time to prepare the projects by the end of 2020. We have to stay away from policies that boost demand but do not generate economic growth, but public deficit.

Remote working is a phenomenon that until now barely had an article in the Workers' Statute. Before the pandemic, only 5% of employees practiced it, whereas now more than 16% are using it. Recently, the Council of Ministers approved the law that regulates it. What are your views on this piece of legislation?

We have negotiated this law since July, and we approve the legislation. Remote working was not regulated and it has been legislated now. However, it is true that we do not consider this to be the most urgent point to regulate. The extension of the ERTES, stability from the regulatory point of view, and the approval of state budgets, etc. are points that we consider urgent. In terms of remote working, we believe that complete isolation is not good for companies because it does not foster teamwork; therefore, it has an impact on the performance of business. Remote working will be part of the new normal, but I do not think there will be a complete shift toward remote working.

What has been the impact of the ERTE temporary layoff mechanism?

The government said that ERTEs cost around EUR5 billion a month, which we believe is not true. The real cost is about EUR1 billion, but for the government the ERTE temporary layoff mechanism is cheaper than the ERE, which is the traditional layoff regulation in Spain. In an ERTE, the important part of social security is paid by the employer, while in an ERE it would be paid by the state in its entirety. We are developing a mechanism to avoid corporate bankruptcies that will happen anyway. The ERTE system has been helpful in avoiding bankruptcies, but it should not be renegotiated every two or three months, as it has been the case.

Is the CEOE having different discussions on ERTEs and assistance to the tourism sector?

These are different topics but are part of the same strategy. Every European country has had a strategy based on three pillars. The first was to provide liquidity, which in Spain has been achieved through the ICO credit loans. The banks have been successful in providing EUR100 billion in liquidity. The second pillar was the ERTE mechanism and the third pillar is everything related to tax moratoriums or payment delays. Spain normally spends all the money it generates in buoyant times, so the consequence is that 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; we should use the good times to save funds that will later help us cope with recessions.

How will Spain's GDP be impacted in 2020?

We developed two scenarios in a report with Deloitte. We expect the GDP to fall by 11% in the best-case scenario and 15% in the worst-case scenario. It depends if another state of emergency is declared, so we expect that any new outbreaks do not lead to new lockdown periods. The public deficit, as a result, will be in the two-digit area. The economy will struggle this year, that's for certain.

What are your priorities for 2020?

Our priority is to continue being useful for the social discussion in order to ensure that the decisions that are made are in the benefit of society as a whole. We are willing to use all our resources to ensure that the recovery funds are well spent.