After years of recession following the financial crisis, the Spanish economy was growing, so what do the latest crises mean for Spain?
After Italy, Spain was the most affected country in Europe, the two countries being shocked by the coronavirus epidemic and the human toll it entails.
The two countries have implemented increasingly drastic measures to stop the spread of the virus which has also wreaked havoc on the economy.
âThe direct and immediate impact will be very hard, it’s already happening. We know a lot of layoffs, a lot of people will lose their jobs, âwarned Carmen Gonzalez Enriquez, senior analyst at the Royal Institute for International and Strategic Studies Elcano in Spain.
“The situation looks like a nightmare,” she said. TRT World by phone from his home in Madrid, which is also one of the hardest-hit regions in Spain.
In the Spanish capital Madrid, more than 12,000 people have been infected and 1,777 have died. In total, the country has seen more than 39,000 infections and 2,696 death.
The Spanish government announced last week a $ 220 billion in aid to cushion the blow, however, whether or not this will be enough for the country dependent on tourism and services will depend on the duration of the crisis.
âA lot of people who are self-employed or small store owners are closing their businesses. The economic package that the government has approved is not ready to cope with this suffering. In Spain, small businesses are the basis of the economic system. It’s going to be difficult for them, âadded Enriquez.
The coronavirus epidemic has hit Spain as the country is said to have prepared for the summer tourist season, so essential to Spain, representing 15% of GDP.
âThis summer will be a disaster for the tourism industry,â Enriquez said pessimistically.
Spain will be one of the many countries in the world that are likely to feel the impact of a decline in tourism, along with many popular Mediterranean destinations like Italy, Morocco, Greece and Turkey in the face of similar perspectives.
The exceptional situation in Spain also created a sense of political unity for a country which held two national elections in 2019.
“Maybe in six months everything has been resolved and we go back to the situation we had before and start talking about Catalonia and the issues that were bothering us in December and all of this is kind of a parenthesis in our lives” , Enriquez said. “But we are in completely unknown waters, we cannot predict what the long term political implications are.”
A local government source in Spain who wished to speak on condition of anonymity due to the sensitivity of the situation gave a first indication of what could emerge after the coronavirus crisis.
âPoliticians in Catalonia and the Basque Country, who have many infected cases, have also criticized the Spanish government for acting very late,â the source said. The two regions before the coronavirus epidemic had active secessionist movements.
âThey closed schools and universities, but you could still take the train to other parts of the country. This has been a problem for the spread of the virus. I think people, in general, are not very happy with the way this crisis has been handled so far. “
After Madrid, the The Basque and Catalan regions have been impacted by the coronavirus according to government statistics.
At the start of this pandemic, many countries around the world were already facing a downturn due to the tariff war the Trump administration started with China and Europe. Some also have suggested that the economic impact of the virus could be similar to that of World War II.
“It is too early to have an assessment of the economic impact of this coronavirus shock in Spain,” said economics professor Joss GarcÃa-Montalvo of the Barcelona Graduate School of Economics.
âFor the European Union, with the information available, the impact could be, at the high end, similar to the so-called Spanish flu of 1918, a 5% decrease in GDP by the end of the year; this is also the figure that the ECB seems to support, âGarcÃa-Montalvo added to TRT World.
Many analysts had started to say that Spain had taken a step forward and had embarked on the regular route reduction in unemployment, which peaked in 2014 at around 27%.
“If the drop in GDP in the EU reaches 22% in the second quarter, according to JP Morgan’s calculations, then the economic implication could be much greater,” GarcÃa-Montalvo said. Whether this happens will depend on how the virus is contained and on medical progress.
âJudging by the effect of the Spanish flu in the past, the recovery could be rapid: capital has not been affected nor financial structures if the liquidity provided by the ECB [European Central Bank] and governments are enough.
Unlike the 2008 financial crisis, which was generated in the financial sector, the economic prescription this time is more about ensuring the liquidity of the markets so that they withstand the current slowdown, rather than trying to stimulate demand.
What is also unknown is what the potential political backlash could be. The rise of populist and nationalist parties has marked the political scene in Europe and the United States. In Spain, in the last elections, the right-wing Vox party came in third place when it did not exist 10 years ago.
“I suppose that, as in many other countries, the populist tendency will be intensified by the crisis: nationalist tendencies and anti-EU sentiment,” GarcÃa-Montalvo said.
Source: TRT World