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(en) [Spain] Cnt nº 425 - Applause for the European agreement that silences its consequences - Dossier New Normality? Union Action! By ANA (ca, pt) [machine translation]

Date Wed, 10 Feb 2021 09:22:29 +0200

Applause for those arriving in Moncloa, with a "historic" agreement. Billions of euros that will stimulate the Spanish economy, which is being affected. The specialized economic media speaks of a "salvation plan for Spain". Is that so? ---- The impact generated by Covid-19 has been brutal on an economic level: unprecedented declines in Gross Domestic Product in the Kingdom of Spain, but this impact has also been felt in other European economies. According to INE, Spain's GDP fell 18.5% in the second quarter due to the coronavirus pandemic. This figure was only exceeded by the United Kingdom, with a drop of 20.4%; the Eurozone fell 12.1% and that of the European Union as a whole, 11.7%. There is no need to go into statistics to be aware of the immediate impact this has had on the economy.

It should be noted that the configuration of the productive fabric is not helping much. The specialization of the Kingdom economy in low value-added services (tourism and hospitality, among others), the sectors most affected by the crisis, is making the economic situation even worse. In fact, they are among the sectors in which the possibility of teleworking is less, one of the outlets that has been encouraged during the Alarm State. If we focus on industry, now that it is proposed to "reindustrialize the country", the industrial weight in Gross Value Added has decreased considerably in recent years, from almost 15% in 2006 to 12.4% in 2018. It should be noted that a large part the industrial sector of the territory is auxiliary to the automotive industry, whose headquarters are located outside the country;

We must also not forget that, if at the macroeconomic level the so-called "crisis" was being overcome, many economists pointed out that the popular classes had not overcome the Great Recession and that we were on the verge of a new crisis, even more difficult if possible.

This is the context in which we found ourselves when the July 2020 agreement was signed.

The agreement numbers

The most common is that when we talk about large amounts of money, we lose track of not being able to compare them with the costs of our usual economy. What is the difference between 60 or 100 million euros? 60 million is the cost of a hospital and 18 million is the cost of its equipment; with this example we can have an idea of what this specific amount means, referring to something with which to compare it. A detail that few media outlets did.

The agreement, with regard to numbers, has several parts. On the one hand, there is the Multiannual Financial Framework (MFF) of 1,074.3 billion euros, which is the budget for the EU between 2021 and 2027. The previous period (2014-2020) was 1,087,197 million euros, therefore, it decreased slightly. The section in which the Spanish government and the media focused, was the EU Next Generation section, in which an amount of 750 billion euros was agreed, of which 390 billion will be direct transfers and 360 billion, loans. In addition, there are another € 540 billion agreed for other issues. To get an idea of the magnitude of the figures, 500 billion euros is the total public expenditure of all administrations in the Kingdom of Spain in one year (central, autonomous and municipal). That is,

In the case of the EU's Next Generation, the main differential element in relation to the previous period's budget (2014-2020) and which, moreover, has been the dispute between EU governments, predefines to which direct aid and loans should be directed . In other words, they are not funds that are granted to each state without further ado, but that have to follow lines preset by the EU. The dispute arose over the proportion that will come from direct subsidies (which will not be repaid) and the portion that will come from loans (for which interest will be paid, of course). The total negotiated share that will correspond to the Kingdom of Spain is 140,000 million euros, distributed in 72,700 million euros in the form of direct aid and 67,300 million euros in loans. Is this too much, or is it not enough? To give us an idea, what he receives in direct aid to the Kingdom is an amount similar to the bank bailout (which, incidentally, will never be reimbursed); or GDP lost between January and June 2020; or 20% of all money that has been injected into banks since 2008; it also represents an amount similar to the cuts of the Central Administration between 2009 and 2014. Perhaps in this way we can have a more precise idea of what the next generation EU's direct aid (which is not debt) means for the Kingdom of Spain.

However, an element that interestingly went unnoticed was the point of the agreement detailing that the member states will develop national plans for recovery and resilience, establishing the reform and investment program, that is, the conditionality of the design (and implementation) of reforms. This is not good for the working class.

A fallen manna from Brussels ... or not.

To continue contextualizing, let's go back in time. In October 2008, at a time when there was talk of re-founding capitalism, a European Economic Recovery Plan was agreed. The Kingdom's share was 90 billion, 8.1% of GDP. In the case of the July 2020 agreement, the amount received between direct aid and loans will be more or less 11%, slightly higher. But it should be noted that the blow now suffered by the economy is proportionally much greater.

There is also the feeling that, from the EU, only money flows to Spain; however, this is not true. If we analyze the financial balance between the State and the EU between 2007 and 2019, we find that 6,675 million euros were received in net terms. What does that mean? That throughout this period, the European Union contributed a little more than what the State sent to it. However, it should be noted that during this period of the Great Recession, 146.684 million euros left the Kingdom for Brussels.

This provides a better context for what the aid was and what it really was.

In the period 2021-2027, European aid will arrive, but the money will also be sent from Madrid to Brussels. As Stuart Media of the MMT Network estimated, in this period, 52.126 million euros will be sent to Brussels. So what will be left of these famous millions of euros? Well, about 20.5 billion euros, 4.1% of the expenses of all administrations in one year in the Kingdom, since the other 67.3 billion will be returned with interest.

Nobody gives anything for free, least of all the EU

The most obvious will be that, in exchange for aid, reforms will have to be implemented. The point is that, until they are negotiated, it is not known what reforms will be implemented. However, a brief historical review reminds us that the main conditionalities have been the rebalancing of the public deficit to 3%, that the public debt should be 60% in relation to GDP, and the "recommendations" to try to reach these numbers have been reforms which have often been cuts. Compliance with the Stability and Growth Pact for the least politically strong states is a must, and it does not appear that it will be questioned. For these reasons, if we look at the total consolidated spending of all Kingdom administrations, we are now practically at the same levels as in 2008 (after a decade in which it has declined), while social needs are increasing: the budgetary effects of the Great Recession have not been recovered. In addition, Article 135 of the Constitution has been a real straitjacket for public administrations.

In this context, will it be possible to revoke the labor reform, as proposed by the parties in the government? They have already lagged behind in time, but with this agreement, Brussels is likely to limit labor reform to something homeopathic. What will happen to the pension system? Well, in this context, the pressure to make the system "sustainable" will be even greater: deepening private systems, making access to a decent pension more difficult and making retirement before the legal age limit difficult.

One of the proposals that has been heard by the members of the central executive has been the need to change the production model, a need that has been in clear evidence after the setback that the economy is suffering. The need to reindustrialize the country has been emphasized. Is this feasible?

The role of the Spanish economy in relation to the European economy is one of subsidiarity and specialization in services with low added value: the entry into the EEC in 1986 reinforced this trend, dismantling part of the industry when it fell from 24.4% of GDP in the year of entry to 12.4% in 2018. What reasons can be given for member countries to encourage industry in a country that is likely to be their future competition? The EU member countries will be the ones who will analyze the proposals and, of course, they will analyze them step by step, taking into account how they affect their economic interests. Therefore, this model of productive change, under the current rules, is seen as something really difficult.

The working class, what to expect

The keys to the European agreement in July must take into account that there are still many details to be closed. However, it is clear that the amount to be received, taking into account what is being paid, is not much to be excited about, although it is more than nothing.

It is likely that the toll we will have to pay is expensive (strange, by the way). The refusal to revoke the Labor Reform, or its delay, may have been a signal to the EU not to raise nerves before the agreement was signed. At the moment, there are no signs of a substantial improvement in labor legislation in favor of the weaker party, the workers.

Public expenditures, especially those related to the implementation of social and welfare rights, must not increase in the necessary proportion; we will always have the limits established by the Stability Pact (which nobody talks about eliminating) and the priority of paying the debt, before dedicating these resources to citizens. What we will have is an increase in indebtedness (and its payment, and the payment of interest) that will further limit the capacity of administrations.

This is as far as parliamentary politics and gambling within the European Union is concerned, there is no more room for maneuver. Only organization, mobilization, pressure and direct action will be able to reverse this situation that is coming upon us.

Source: https://www.cnt.es/noticias/aplausos-para-el-acuerdo-europeo-que-silencian-sus-consecuencias/

Translation> Liberto

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