The pandemic has for the moment buried the sacrosanct dogma of austerity that was imposed from the countries of the North during the financial crisis of 2008. In the European Union, the States have come to the aid of the industries most affected by the confinement.
In Spain, the Government has deployed an assistance network with ERTEs or financing through ICO loans, although for the moment it is dragging its feet before the possibility of giving direct aid. Several autonomous communities request that greater effort to rescue two of the sectors with the greatest weight in the economy: tourism and hospitality.
These are the public aids that have been activated so far in the main European countries.
France: “Whatever it takes” to the rhythm of Hamlet
Despite having been on the front lines against the worst crisis in France since World War II, Bruno Le Maire, Minister of the Economy, found time in 2020 to write his Provisional Reports. In them he makes a frenetic recount of a pandemic whose high bill – more than 41,000 million only in “emergency aid” to companies and workers – no one could imagine. But of which he says he does not regret.
“We preserve powers that France took decades to create and avert a tsunami of bankruptcies,” he told the Senate in January. But as he acknowledges in his book, in which he cites Hamlet’s maxim of “be prepared for anything,” for a conservative like him it was not easy.
“After three years of efforts to reduce public spending and bring the deficit down to 3%, after months of arduous budget discussions, in which we counted every million, my chief of staff proposes to spend 300,000 million euros in 24 hours. euros ”, he tells about the vertigo he felt the first 15 days of March in which“ the economy of France was at stake ”despite the fact that the president, Emmanuel Macron, had given a clear slogan,“ whatever the cost ”.
So nervous was he that he consulted his friend Mario Draghi. “He told me: spend your money, friend. It is time to spend. Right now. Later, it will be too late ”. And France spent.
In March, Paris approved state-guaranteed loans for up to € 300 billion (ultimately € 135 billion was granted in 2020). In addition, he approved a package of aid to companies and workers for an initial 45,000 million, which at the end of the year reached 87,000 million to adapt to the new blows of the crisis, especially the second confinement, at the end of October , and the decision, in mid-December, to keep closed sine diethe catering and culture sectors.
Of that item, finally half was spent: more than 23,000 million euros went to partial unemployment; almost 12,000 million to the “solidarity fund”, aid to small and medium-sized companies forced to close or strongly reduce their activity, which have been expanded and adapted, to focus especially on the most affected sectors – tourism, restaurants and culture. , and 4,000 million more in tax exemptions, among the main disbursements.
Finally, the French economy contracted last year by 8.3%. The bill is high and it is probably one of the factors that are weighing the most in the decisions of the Government, which has been doubting for weeks whether or not to dictate a new confinement.
If it does, it is estimated that the economy will contract 1% this first quarter. If we continue as before – with a curfew and the hotel and culture industry closed – GDP will grow by around 1.5%. To confine or not to confine, that is the question.
The pandemic has forced Germany to allocate the largest aid package in its history to protect jobs and companies, worth 750,000 million euros. In direct grants alone, it has already disbursed about 80 billion, said Economy Minister Peter Altmaier in Parliament last week.
Of these, 23,000 million have been allocated to the equivalent of the Spanish ERTE, the kurzarbeit, or subsidized reduced working hours, to avoid layoffs. The State temporarily assumes between 60% and 87% of the salary that the worker stops receiving due to the reduction in working hours.
In August it was approved to extend the kurzarbeituntil the end of 2021. The Minister of Labor, Hubertus Heil, has recognized that the measure is “very expensive”, but “mass unemployment would be economically and socially much more expensive.” In addition to these measures, the Länder have their own programs.
There have also been millionaire aid to large companies. At the end of May, the government agreed with Lufthansa a rescue package valued at about 9,000 million in exchange for a 20% stake in the capital. In April, the tour operator TUI received 1,800 million euros, at the end of summer another 1,200 and in December 1,300 more, between public loans and convertible bonds.
In early July, when the epidemiological situation was very stable, VAT rates were reduced from 19% to 16% and from 7% to 5% until December to stimulate consumption. A study by the IFO Institute concluded that this temporary VAT reduction had little effect and did not compensate for the loss of collection.
The measure has not been extended in 2021. The VAT for the hotel industry at 7% will be maintained throughout the year, as agreed this week by the Government.
Small and medium-sized companies in the trade, transport and hospitality industry receive extraordinary aid to mitigate the losses due to the mandatory closures of the second lockdown, which began in November, so that they can meet fixed costs. The Government pays for 75% of the income they declared in November 2019.
During the pandemic there has also been direct aid to families. Between October and November they received 300 euros per child, and this week the partners of the Government coalition (the Christian Democrats of the CDU and the Social Democrats of the SPD) have approved a new income of 150 euros.
It is a bonus that is compatible with other benefits and is charged regardless of the family’s situation. Tax deductions have also been approved for single parents.
All were congratulations when the British economy minister, Rishi Sunak, announced on March 11 a budget shift. They were his first public accounts, and the goal was to contain the ravages of the pandemic at all costs. The package of measures began to put aside fiscal orthodoxy, without renouncing it entirely.
The impact of the covid-19 would be “relevant” but “temporary”, said the minister. Extraordinary financing for the National Health Service and limited aid to companies in the form of deferred taxes or credit guarantees. Six days later, the Boris Johnson government was beginning to understand what was coming.
By then there were already more than 750 infected each day, and the transmission rate was 509 cases per 100,000 people (in the United Kingdom it is measured every week). A € 375 billion plan was put on the table that already included direct grants. 15% of GDP. Started theJobs Retention Scheme (Plan of Retention of Jobs), a system similar to the Spanish ERTE that the British law had not contemplated.
The State assumed 80% of the salary of the workers held in their homes, up to a limit of 2,800 euros per month. Sunak wanted to gradually reduce this aid. In summer he even suggested that he was about to disappear. Political pressure, and especially the insistence of a virus that never completely disappeared , twisted his will. For now, the plan remains in effect until at least April.
The hospitality industry has been impacted like no other sector. Direct aid, non-refundable, for all businesses forced to remain closed amounted to a limit of 3,400 euros per month. On January 5, during the third wave, the Government went further and committed up to 10,000 euros, in a single payment, that could be added to the monthly subsidies.
The VAT (VAT, for its acronym in English) of restaurants, hotels or pubs remains reduced from 20% to 5%, and the sector demands that the figure be permanent and not provisional.
The United Kingdom is immersed in historical levels of indebtedness and is one of the European economies that has suffered a greater decline in GDP in 2020 (more than 10%), but the Bank of England forecasts a rapid recovery , thanks to the accelerated plan of vaccines, and has endorsed all direct aid.
In Italy, almost every government decree to control the health situation, often with the progressive closure of economic activities and restrictions on mobility, has been accompanied by public aid. The latest, of about 2 billion euros, were approved in November. In total, the country has promoted stimuli of up to 100,000 million, broken down into eight major economic decrees.
One of the first measures that were taken in March, a week after the confinement was ordered, was the veto on dismissals for economic reasons, which is still in force.
The temporary suspension of the tax obligations of companies and citizens, the delay in the payment of mortgages, a fund for ERTE and several bonds of different types for nannies, for the closure of schools or to acquire material for teaching was also approved. distance, among others, or compensation for workers in tourism, sports or culture.
Prime Minister Giuseppe Conte stressed: “We know that it will not be enough, but we want to send the message that the Government responds today and will respond tomorrow.”
In the first wave, the historic gap between the prosperous North and the impoverished South emerged starkly, where the shadow economy and black work support nearly four million people. In March, the State began to distribute food vouchers for the most disadvantaged people through the municipalities. It was announced shortly after the police had to intervene in Sicily after some looting in supermarkets. And in May it introduced emergency subsidies of up to 400 euros for the lowest incomes.
The pressure on the government has always been high and in October a wave of protests broke out against the restrictions and the lack of aid, particularly for the hotel industry, commerce or taxi. The Executive responded in just two days with a new stimulus package of 5,400 million.
The biggest challenge has been getting around the convoluted bureaucracy and streamlining the process so that the aid arrived on time. At the beginning, the confusion was such that, fearing that the funds would remain stagnant, the first non-refundable compensations of 600 euros for the self-employed were distributed indiscriminately to everyone, without filters. Later, the mechanism was hardened and there are sectors, such as culture, that protest because they have not yet received the promised subsidies.
The intense waves of infections in Belgium have led the federal government to impose harsh restrictions that have affected economic activity. The former Sophie Wilmès executive closed all non-essential businesses: from catering to small businesses.
Belgium, with a strong assistance network, provided a network to companies and workers: it launched temporary employment protection mechanisms, chômage partiel, equivalent to ERTE, activated a guarantee scheme for 50,000 million and launched direct aid to workers. self-employed, who received 3,228 euros per month in the case of independent professions with family and 2,584 euros for those who had no one in their charge.
Good infection data allowed restrictions to be lifted in May. It was made progressively: first the shops, then the gyms and facilities, then the restaurants and ultimately the bars.
They did so with capacity and schedule restrictions, so the Government maintained an aid to accompany companies towards the recovery of between 1,291 and 1,614 euros per person, and deployed tax reductions – the VAT for the hotel industry went from 12% to 6%. % – and increased bonuses to encourage investments from 8% to 25% of the amounts.
The second wave, however, forced Belgium to give another bolt on all non-essential businesses. Again, each closure was accompanied by aid. The current government, led by the liberal Alexander de Croo, recovered the partial unemployment benefits and once again strengthened the businesses of the self-employed.
The stores reopened in December, but the same did not happen with hair salons, bars or restaurants. The federal government then decided to divide these subsidies into two sections: closed companies will continue to receive between 2,584 and 3,228 euros per month, while those that have opened but can prove that their turnover has fallen by 40% will receive between 1,291 and 1,614 euros.
To all these aids must be added the subsidies and allowances from regional governments. Brussels, for example, grants aid of 1,500 euros to businesses that had to close and has announced that it is preparing a package with more generous amounts for bars and restaurants (between 5,000 and 36,000 euros), accommodation (between 5,000 and 50,000 euros) and discos ( between 60,000 and 100,000 euros).
There will also be concrete aid for the tourism sector, after the Government closed the door to non-essential travel. All that tangle of measures has had a side effect: it has revived zombie companies. The National Bank of Belgium estimates that some 8,000 companies have become profitable thanks to public money. A lesser evil in a country where, according to the entity,
The first wave of the pandemic caused the economy to shut down in much of the country, with New York State as the epicenter. As a result of the lockdown, millions of people lost their jobs and thousands of businesses closed — especially in the service sector, hitting precarious workers badly. Congress approved the first stimulus package in March, worth 2.2 trillion dollars (1.8 trillion euros).
Of the total, a credit line of 367,000 million (304,000 million euros) was allocated for SMEs affected by the economic downturn, in addition to a fund of 500,000 million (415,000 million euros) for industries, cities and States. The rest of the aid was directed to families, through direct checks for 1,200 dollars (996 euros) and coupons for the purchase of subsidized food.
The duration of the unemployment benefit was also extended. What until then was the most powerful rescue plan in US history soon proved insufficient, as Covid-19 infections spiraled out of control.
In December, in the second aid program approved by Congress after months of partisan blockade, with an amount of 900,000 million dollars (747,000 million euros), an additional 250,000 million (207,000 million euros) were available for loans to companies.
Individuals with annual income below $ 75,000 (62,000 euros) received new checks, but this time for $ 600 (498 euros), replacing the already defunct 1,200. The approval of the plan was a direct consequence of the recurrence of the coronavirus after the summer hiatus, during which the majority of States fully or partially resumed economic activity (for example, the restaurant and leisure businesses).
The second wave of the pandemic, noticeable in the fall, reached its climax in the December holiday period,
Coinciding with the third wave, and as the country borders 26.5 million cases and 450,000 deaths, President Joe Biden’s ambitious anti-coronavirus plan depends on the approval of Congress . Almost two trillion dollars (1.6 trillion euros), half of which will be distributed in checks for 1,400 dollars (1,162 euros) to families, and another 440,000 million (365,000 million euros) to support SMEs and most affected communities.
The amount of this comprehensive plan is garnering criticism from Republicans, who claim to cut it to a third. There are 10 million fewer jobs in the US today than before the coronavirus pandemic. Meanwhile, the Federal Reserve (Fed) has established a long era of zero rates to encourage growth and employment.