The Spanish government has earmarked €150 billion for public investment in 2021 and 2022. That’s according to a draft of the government’s investment and reform plans to which EL PAÍS has had access. According to the estimates in the document, this should encourage another €500 billion in private investment.
The draft indicates that the Spanish government is planning on taking a very different approach to the coronavirus crisis than that of their predecessors during the 2008 financial crisis. The current administration, which is led by a coalition of the Socialist Party (PSOE) and junior partner Unidas Podemos, is betting on high levels public spending instead of the tough austerity measures that were introduced under the previous PSOE and Popular Party (PP) administrations in response to the global downturn.
Some ministers told EL PAÍS that while the document is a good start it lacks detail and a more ambitious vision for the economic transformation of the country
Spain must send the European Commission these investment plans if it is to access the €750-billion coronavirus recovery fund that is currently being negotiated. If all goes according to plan, Spain will receive €140 billion to help shore up its economy. More than €74 billion of this funding will be in the form of investment grants, which do not need to be paid back. This has allowed the government to consider an ambitious plan to mobilize €150 billion in public spending within two years.
The draft of the investment plan is currently being debated within the coalition government. Some ministers told EL PAÍS that while the document is a good start it lacks detail and a more ambitious vision for the economic transformation of the country.
“An Investment and Reform Plan that centers on a group of large-scale projects with great capacity to transform and modernize our economy and society must be put into place as soon as possible,” the text reads.
According to the document, an estimated €150 billion – approximately 6% in gross domestic product (GDP) – is needed to put Spain on the same level as the most advanced countries within the Organisation for Economic Co-operation and Development (OECD) with respect to the ratio of public spending. “This public investment would be an important catalyzer for private investment, with the ability to mobilize a total of €500 billion,” the document adds.
The unprecedented plan comes as the Spanish economy struggles to recover from the coronavirus lockdown and health crisis
With regard to funding the investment plans, the draft only mentions a few ideas such as a financial transaction tax, levies on single-use plastic, a digital services tax and a plan to combat the informal economy.
The unprecedented plan comes as the Spanish economy struggles to recover from the coronavirus lockdown and health crisis. According to the document, “the current forecast indicates a public deficit above 10% of GDP in 2020 and a debt ratio of around 115% of GDP, with an emission of an additional €100 billion in public debt. Of this amount, approximately 45% comes from the direct measures to respond to Covid-19 and 55% is the stabilizing effect of the fall in contributions from primary taxpayers and the increase in unemployment aid.”
The document also sets out measures to support businesses “that guarantee the creation of a strategic reserve of material and medical resources,” as well as Spain’s tourism industry. In the case of the latter, this includes extra funding, promotional campaigns and vouchers that healthcare workers can use at restaurants and hotels.
English version by Melissa Kitson.