surinenglish

THE EURO ZONE

A new approach

I might be perceived as backtracking in this column. In my defence, though, everyone is working things out as they go when it comes to this pandemic, even (or "especially") governments. So you'll forgive me, I hope, when I slightly modify the line that I took here a couple of weeks ago.

Then, I argued that the EU needs to step in and help Spain deal with the economic consequences of the Covid-19 pandemic, in part by offering an aid package to bolster the €200 billion already pledged by the Spanish government. I stand by that: clearly, some kind of assistance will be necessary for Spain, especially as Pedro Sánchez has extended lockdown to 26 April, thus worsening the economic situation. Despite an impressive GDP performance since 2013, the country's economy is still fragile and will be rendered even more vulnerable by restrictions imposed to try and slow Covid-19's advance (with questionable efficacy).

As well as repeating its call for the EU to establish a "wartime economy" and to implement a "Marshall Plan", Spain's Socialist government is now also talking about introducing Universal Basic Income (UBI) to help households deal with unemployment, after the jobless rate soared last month. If implemented, UBI would be added to the costly welfare policies contained within Sánchez's proposed budget for 2020, to the €200-billion emergency package and to the stringent fiscal demands that have been issued by Brussels for the next few years.

We have to ask: how is Spain going to afford all of this? Are there secret coffers underneath Moncloa, packed with cash that's somehow been diverted from politicians' pockets? Is there a "Rainy Day" fund that has miraculously avoided being plundered by grasping hands?

As we enter the fifth week of living indoors, it would be a relief to see the Spanish government looking at ways to get the economy running normally again, not just working out how much and what kind of assistance it will need from Brussels.

Emergency measures are precisely that: policies designed to deal with the short-term impact of a crisis, often put together hastily and with insufficient information. By definition, they cannot replace long-term strategies designed to prevent or recover from recession. To cope with the current pandemic and its aftermath, both are required, especially for a country as economically vulnerable as Spain.

If Spain is to avoid another economic crisis, life needs to return to some kind of normality as quickly as possible. But all we see at the moment is an improvising government repeatedly extending lockdown - the end-dates of which are starting to mean as little as Brexit deadlines did - and talking of throwing vast amounts of money (that it doesn't have) at the problem. Clearly, a new approach is required.