In Spain, it is not a good time for the economy. When we were climbing toward the peak of the curve, the government had no choice but to prioritize health. That is what most countries finally decided to do. Those who did it early enough, like New Zealand, are now basking in glory. Those who opted for the opposite course of action, like Brazil, are now paying the price.
Spain waffled around before making any decisions. The government finally closed the whole country down only after the pandemic had spiraled out of control. This move undoubtedly saved lives, but it should have been done sooner. Now it is necessary to deal with the aftermath.
Fifty days or so of confinement brought all economic activity to a grinding halt. During that time, the evil coronavirus fairy waved her magic wand, and transformed Spain into an economic wasteland. Many jobs vanished: some temporarily, others probably forever. Those jobs that remained were transfigured.
In this brave new world, people had to suddenly figure out how to work from home, often in the midst of family chaos. Certain colleagues of mine had to buy a computer because they did not have one at home. Others had to buy a second (or third) computer because suddenly all family members had to have a computer to work or to study.
Nevertheless, these were the lucky few since only a relatively small percentage of workers were actually able to work from home. It is estimated that only 25.4% of jobs in Spain can be done online – a percentage that could perhaps rise to 43% when restrictions are scaled back to a minimum. So, a lot of people are simply out of luck.
For this reason, there is now a great divide between the privileged few that have jobs that can be done remotely, such as those working in education, finance or computer science, and those who work in catering or retail with face-to-face contact. Many of these jobs may never return. Even if establishments reopen, the workforce will probably be downsized.
Most of the recently unemployed once worked in restaurants, bars, hotels, or stores. These establishments are now closed, and some might never open again. With all of the new measures imposed, no one knows whether it would be even worth it to re-open. It is a whole new ballgame. Owners are wondering whether a store, hotel, or restaurant operating at 50% of its capacity can make a profit.
In Granada, a lot of bars now have a sign hanging on the door that says “Mejor cerrado que arruinado” [Better closed than bankrupt]. This same sign is also hanging on the doors of other establishments throughout Spain.
I am among the privileged because I can work from home. My job will not disappear. My children have also continued to work during confinement. Law enforcement, healthcare, and coroners are always needed, even more so in times of disaster. Even my son, the pilot in Texas, has not been laid off because he works for a cargo airline. However, friends of his who work for passenger airlines have not been so lucky and are currently on furlough.
I have friends whose children have not been so fortunate. They have been laid off, sometimes without unemployment benefits. Even those who will be able to return to their jobs in De-escalation Phase 1 or 2 have nowhere to leave their children because daycare centers are still closed. (Perhaps in September, someone will find a way to explain social distance to toddlers.) So, family safety nets have never been so necessary.
Many other people are even worse off because they are struggling to cope with no income, no access to unemployment benefits … and/or no extended family to help them. They do not know what to do. At least during confinement, no eviction notices can be served. So they cannot be kicked out of their homes for not paying rent.
When the dust settles and the focus is no longer on death statistics, the government will have to get the economy ‘back on track’. The problem is that they really don’t have a clue about how to do this. The treasury has to be replenished, but to get the money, the government has to choose between two unpopular options: spending cuts or tax hikes.
Gloomy predictions for Spain’s economic future include a 9.2% reduction in national growth as well as a national debt that will come to 111.5% of the Gross Domestic Product (GDP). To remedy this problem, certain economists have suggested lowering pensions given that €2 out of every €5 collected in taxes are allocated to that particular budget item.
Even though thousands of pensions no longer need to be paid because government inaction allowed Covid-19 to carry off thousands of elderly retirees, the savings resulting from their deaths are not sufficient to solve the budget problem.
According to experts, the government may decide to increase taxes, cut social spending, and/or raise the retirement age to 67. It is a question of either dismantling part of the welfare state or increasing revenue by asking people to earn less and/or pay more.
For now, the government is stalling. On the news, our leaders tell us what we want to hear. A few days ago, the Finance Minister stated that there would not be any massive spending cuts or massive tax hikes. Possibly, she has devised a plan to rob the World Bank. No one knows.
The good news is that the economy will supposedly bounce back in 2021… if only we can keep the coronavirus away.
