Spanish Socialist Government Worsens Economic and Health Crisis
Spain is facing the biggest economic crisis since the Civil War with one of the worst public deficits (in the whole European Union) and with the worst democratic government.
Spanish – By Hugo Pereira Chamorro
The socialist-communist government of Pedro Sánchez and Pablo Iglesias is the chief culprit driving the health and economic crisis. They prioritized their ideological interests to satisfy the wishes of the radical feminists, and focused all their attention on promoting the demands of their Machiavellian partners in government, including Quim Torra and his “Catalan coñazo.” Thus, they ignored and underestimated the coronavirus, which has resulted in more than 10,000 deaths and almost 120,000 cases so far.
The WHO and other international organizations urged all countries, including Spain, to prohibit mass events and implement large-scale testing. However, Pedro Sánchez ignored these requirements. The government allowed the gathering of thousands of people around March 8. Other events, such as sports events, were also carried out per usual. This is real negligence that has taken away the lives of thousands of people, leaving so many thousands of families devastated.
Don’t let them fool us. A few days ago, police confirmed that the purchase of masks and other sanitary equipment had been ordered since January. Furthermore, the uncontrolled epidemic in China was already invading other Asian and European countries. It was well-known. In fact, it was so clear that they even decided to lie and hide the number of deaths that had occurred between March 7 and 8 to not alarm the population. The problem is that, if the government banned certain events, there would be no excuse for holding the 8M demonstration and, of course, the great ideological party of the left could not, in any way, be canceled. “Better dead than fascists.”
The looming economic crisis
This health crisis, however, will be followed by a severe economic crisis. And if the government has already shown that it cannot set aside its sectarianism even when people are at risk of death, imagine the disastrous economic consequences. And we don’t even have to imagine anything. It is clear already. Spain is facing the greatest economic crisis since the Civil War with one of the highest national debts (in the entire European Union) and with the worst democratic government.
To understand why an economic crisis will break out in Spain, we must take into account our precedents. In 2019, the gamut of local administrations recorded a deficit of 32,882 million (about 2.6% of GDP), which is twice the target of 1.3%. Nevertheless, public revenues rose by 3.8% year-on-year. In other words, the state increased spending by 4.1% (recall: social Fridays, higher pensions, higher public wages…). Last year, the public debt closed at 95.5% of GDP while the maximum debt level established in the Maastricht Treaty is 60%.
Thus, Pedro Sánchez has no debt margin. Now more than ever, we understand why it was, and is, necessary to clean up the public accounts when it was possible to do so. We would have debt capacity when required. Currently, we find that Spain and Italy are burdened with many more liabilities than Germany and the Netherlands, countries which have made an effort to reduce their debt in a sustained manner since 2013, while the former has essentially kept it stable.
Several countries, including Spain and Italy, did not balance their budgets and thus increased their margin debt. Now, they are asking Germany and the Netherlands, whom they owe money, to “bargain” flexible financing with virtually no cost or conditions. Thus, we again see the need to apply classical liberal measures, which entail maintaining balanced budgets (not having more expenditure than income) and, above all, not wasting public money, so that debt, or, in any case, taxes (which often impede the business process) do not increase. Most experts estimate that the fall in GDP could be between 5% and 13% in 2020.
As I said before, it is not something we need to imagine. We are already witnessing the dreadful economic measures being implemented by the Spanish government, which will lead us straight into the abyss. Firstly, it is not taking into account the slowdown that was already taking its toll before the crisis. Secondly, it is ignoring that our companies (most of them small, with less than ten workers – specifically 89% of SMEs) cannot last several months with zero income while they face the obligatory payment of taxes and fixed costs that are accumulating (the average cash flow of these businesses is, in the best of cases, 35-60 days). Thirdly, the government thinks or implies that when the state of alarm ceases, companies will be able to not only recover their losses but also make more profits. And fourthly, and this is a fundamental problem, they are not taking responsibility for the situation in which we find ourselves.
Unfortunately, the latest data show that we are not facing a V-shaped crisis, but an L-shaped one, which implies a rather abrupt collapse of the economy and a slow and very hard recovery. It seems that the situation will even become structural, and we could be facing an even worse recession than the one that started in 2008. And the government is dealing with both the diagnosis and the solutions poorly.
In conclusion, neither our SMEs (which are barely digitized and that is costing them during confinement) nor our government is prepared to face the grave economic crisis that is looming upon us. Furthermore, as is commonly known, the government has completely overlooked the self-employed, who have only been granted certain demands made by self-employed organizations (such as the ATA). On March 31, thousands of self-employed people had to pay their dues religiously (although it has already been announced that, fortunately, some of them will be refunded part of the money they paid to the state).
The notorious measure of “banning layoffs” is driving companies to close down. The number of unemployed people is increasing significantly. A company that earns zero income per month and has to pay taxes and fixed costs cannot continue to operate as if nothing had happened. Enacting an ERTE is only a temporary measure. So companies won’t just be able to lay off a limited number of employees. The entire workforce will be left unemployed as the company has to go out of business.
The state wants to maintain tax collection no matter what. It is effectively building the tomb where the economy will be buried. Now more than ever, we need classical liberal measures and labor flexibility so that companies can survive, and new business ventures can enter the market without being hampered by tax burdens and labor rigidity.
It isn’t a problem of spending, but prevention and foresight
Recently, we have been hearing that hospitals have collapsed because of cuts in private health care that were supposedly made years earlier by the PP. This is false. Quite the contrary- during the last years of PP’s government, public spending on health care increased significantly. To be precise, in 2011, it amounted to 71,667 million euros, and in 2018, to 75,435 million. Thus, it rose by almost four billion.
In any case, the saturation of the health system is not a question of expenditure. For example, South Korea (with a larger population than Spain, 51 million inhabitants) has spent 30% on public health care (compared to 41% in Spain) and has recorded considerably fewer deaths and infections (at the time of writing, 139 deaths, and 9,332 cases). Singapore, along with South Korea, one of the most liberalized countries, has spent 18% on health care and, although it has fewer inhabitants than Spain (5.6 million), it has become a global example of crisis management with only three deaths and 1,000 cases at the moment.
We must, therefore, ask ourselves why these two countries have been successful. It is simple: they have put in place a flexible and effective system of prevention and analysis.
Singapore used so-called “disease detectives” to track locations where the virus was present. With a sophisticated contact tracing program, it managed to cut short the chain of contagion from the sources of infection.
South Korea’s success against the virus can be attributed to the fact that it conducts about 10,000 tests per day, which has made it possible to isolate the asymptomatic population, which, as we know, contributes greatly to the spread of the virus. Moreover, it implemented drastic and effective isolation measures on a regional basis.
Therefore, the blockage of the Spanish health system in the face of this crisis did not stem from health spending (which, let’s remember, has increased in recent years), but from disastrous management and a real lack of foresight on the part of our PSOE and Podemos administration.
The question is whether the socialist-communist government will be able to cope with this critical economic situation or whether it will prioritize its party and ideological interests as it did with the health crisis? And, above all, will the opposition hold the government accountable once this happens, or will we let them whitewash this chain of negligence? May God have mercy on us, my friends.
Hugo Pereira Chamorro is a political scientist and researcher at the Think Tank Civismo.