THE EURO ZONE
Spain's Socialist government is right to stick to its decision, made after the state of alarm ended in June, to hand control of the new wave of Covid outbreaks to regional governments. The point now up for debate is whether Pedro Sanchez's coalition should also have employed a similar strategy back in March, rather than imposing a blanket lockdown on every part of the country, which included a two-week "hibernation" of the entire economy.
The disparities between the number of new Covid cases recorded in different regions of Spain highlight the flaws of a centralised approach to the virus. Throughout July, the majority of new infections were occurring in Aragon and Catalonia, but now Madrid is the worst-hit region, accounting for around a third of all the most recent cases. It would make zero sense if Cantabria and Extremadura - which have always been two of the least-affected regions - were now required to adopt restrictions deemed necessary in the densely populated capital, or indeed any other parts of the country that have seen sharp rises in new infections since lockdown ended.
During the first half of this year, the centralised containment approach employed by Sánchez was partly responsible for the damage sustained by the Spanish economy, especially that suffered by the labour market and the tourism industry. According to the latest Eurostat figures, Spain lost the most jobs in Europe during the first six months of 2020, with an overall drop of 8.5% in employment (1% the first quarter and 7.5% in the second).
In part, these downturns are explicable with reference to the structure of Spain's labour market, specifically its heavy reliance on temporary contracts, a disproportionate amount of which are in the severely affected hospitality and tourism sectors.
Figures from Spain's National Institute of Statistics show that, during the second quarter of this year, just 2% of permanent positions were lost, but 11% of all temporary contracts were cancelled. This imbalance is partly why the overall drop in employment was not as high in France or Germany - which saw 1.4% and 2.8% reductions during the first six months of 2020, respectively - and highlights a long-standing problem that requires the government's immediate attention.
The fundamental cause of Spain's employment downturns, however, was a stultifying lockdown, which resulted in a contraction of 18.5% of GDP during the second quarter of 2020 - the worst for almost a century. The only other European country that suffered comparable damage is the UK, which also imposed strict confinement measures and which saw a reduction of 20.4% between April and June - the worst on record. Over the coming months and years, as the long-term effects of blanket lockdowns emerge, there will hopefully be a considered debate about their pros and cons; but in the meantime, each regional government in Spain should have the freedom to react to the specifics of its situation.