The coronavirus crisis will also lead to public rescue of companies, as happened with the recession of a decade ago, although this time with many nuances. The State will assist companies affected by this unfavorable as well as unforeseen economic environment: it will do so by entering directly or indirectly into its capital.
That was one of the measures that came out yesterday of the extraordinary meeting of the Council of Ministers, where a million-dollar plan was launched to achieve the “reactivation” of the economy and avoid its collapse after confinement, according to the President of the Executive, Pedro Sánchez, in a solemn presentation of the program.
The public rescue tool will be the new Strategic Business Solvency Support Fund, an instrument that will be endowed with 10 billion euros and whose objective is to provide “temporary” support – the first nuance – to reinforce the solvency of companies affected by the pandemic. Another difference with respect to the previous crisis: it will not represent an endorsement of the banking sector, whose entities are excluded from the measure. The nationalization It would come if the percentage of State participation is decisive in the decision-making of the company, as it has been in Bankia since 2013.
What the State will do is enter the shareholding of these strategic groups. It will do so through SEPI (the State Company for Industrial Participations) through participative loans, the acquisition of subordinated debt or the subscription of shares or other capital instruments. In other words, it is not a matter of subsidies, but of company participations through different formulas.
The Prime Minister argued that the purpose of the fund is to guarantee the continuity and solvency of companies that are experiencing severe difficulties due to Covid-19, but are “Perfectly viable and solvent and constitute the heart of the productive and productive fabric”. And it pointed to various sectors in which the State could participate: security, people’s health, infrastructure, communications, or its contribution to the proper functioning of markets.
Step back on dividends
The measure would also imply an important conditionality, the prohibition of distributing dividends if they were aided by the State. This was contained in the initiative of the PSOE in the Commission for the Reconstruction of Congress. But yesterday at the last minute, the socialist group, after agreeing with Citizens, It eliminated from the conclusions that requirement that two days earlier it had supported.
In any case, the amount of the dividends, interests and capital gains resulting from the investments made by the State will be paid into the Treasury.
Three and a half months after decreeing confinement, the Government has put another millionaire program on the table again so that the activity “Return to growth and recovery” after the pandemic, as Pedro Sánchez has indicated.
For this reason, the Executive has put on the table the creation of a new Line of Guarantees of the Official Credit Institute (ICO) for 40,000 million euros. It is aimed at promoting investment activity and promoting it in the areas where the greatest added value is generated, around two main axes: environmental sustainability and digitization. This new line of the ICO comes after that of the 100,000 million guaranteed to provide liquidity to companies.
In addition, it has approved the ‘Tourist Sustainability Plans at Destinations’ to promote the development of tourist destinations located in rural and inland areas. It has also approved a mortgage moratorium for properties affected by tourism, through the granting of a moratorium period of up to 12 months for mortgage-based financial operations signed with credit institutions.
It has also definitely started the Renove 2020 Plan for the acquisition of efficient vehicles in exchange for delivering a car with more than ten years of life. The plan is endowed with 250 million with aid ranging from 300 to 4,000 euros, depending on the type of vehicle and the beneficiary. There may be an additional 500 euros in the event of scrapping a vehicle over 20 years of age, beneficiaries with reduced mobility or those who belong to households with monthly incomes of less than 1,500 euros.
The program will end on December 31, 2020 or until the credit enabled for this purpose is exhausted. As a novelty, those who have acquired a vehicle since June 16, day in which it was presented by the Executive. It is estimated that this plan will have an economic impact for Spain of 1,104 million throughout the entire value chain and associated services, and that it will contribute to the maintenance of 7,400 jobs in the sector.
The set of measures discussed in this extraordinary Council has also focused on the tourism sector. On the one hand, the project financing system for digitization and innovation has been launched with a provision of 216 million in 2020. A maximum of 1,100 loans are foreseen for each financial year, based on an average loan of 200,000 euros.
In addition, the creation of the instrument called ‘Tourism Sustainability Plans in Destinations’. ANDhe objective is to promote the development of tourist destinations located in rural and inland areas. Thirdly, a mortgage moratorium has been approved for properties affected by tourist activity, through the granting of a moratorium period of up to twelve months for mortgage financial operations signed with credit institutions. Self-employed workers and legal entities with registered office in Spain may be beneficiaries, provided they experience financial difficulties as a result of the health emergency.