Despite the fact that Spain has recently taken €140 billion, including €72 billion in grants, from the European Union, making it the second-biggest recipient of such funding after Italy, over 91,000 small businesses have closed down since the start of the pandemic.
A report published this week by the Employment Agency Asempleo concludes that the number will exceed 100,000 by the start of the New Year.
Unfortunately, despite their dire position, workers and small businesses are unlikely to see any direct benefit from these funds as they are primarily designed to guarantee corporate profits and especially those of large companies.
While tens of millions of workers and small business owners have only received (or are still waiting for) meagre COVID-19 payments, billions of euros are being handed out, with unprecedented speed, to the banks and major corporations.
A draft royal decree specifies that most of handouts will be for Strategic Projects for Economic Recovery and Transformation (Proyectos Estratégicos para la Recuperación y Transformación Económica – PERTE). These projects will foster public-private partnerships to “strengthen those projects” that contribute “to economic growth, employment and the competitiveness of the country.”
The main targets are clearly companies belonging to Spain’s Ibex 35 stock exchange, and not the small businesses, let alone the working classes.
But what about the more than 90% of small businesses, with five or fewer workers, that are much less well equipped to deal with adversity. Their defensive capacity is much reduced and their financial structure is vulnerable to a fall in demand.
Larger companies generally resist better, as they are much more productive with a more highly educated leadership. They also have access to resources that the small establishments do not. A company such as Telefonica can borrow from the bond market, it doesn’t need the banks, but a local bar from Cabo Roig or La Marina can only turn to the bank for credit, which would usually prove more difficult, and during these current times almost impossible.
However, as businesses continue to call for urgent help it might finally not be too far away, with the government now preparing a support plan aimed at helping small business and particularly the hostelry industry.
Some of the measures under consideration include: subsidies and waivers on Social Security payments, or soft loans through the state-owned bank Instituto de Crédito Español (ICO), helping businesses to renegotiate their rental contracts
Another option is direct money transfers, which is what has been demanded by the industry’s main associations. “Funding lines alone will not be enough because businesses are already heavily in debt,” said José Luis Yzuel, the president of the Spanish Hostelry Association, which represents bars, restaurants and cafés across the country.
“We are now calling for direct support, as other European countries have already provided,” said Yzuel.
But of the time frame, the review of the plan has passed through the preliminary stage and is moving toward becoming a final proposal. The departments working on the initiative do not want to set a date for its launch, but with time running out the Spanish government it being told that it must now launch the plan as soon as possible, before the industry is decimated even more.