Spain It is well below its main European partners in terms of guarantees put in place by the Government to cover the financing of SMEs and the self-employed during the crisis of the coronavirus. Specifically, the executive has activated a line of guarantees for a maximum of up to 100,000 million euros, while France triples that aid and Germany raises it to 400,000 million.
This disparity and the lowest percentage of GDP allocated in southern European countries In order to face the current pandemic, they make it “very likely” that the way out of the crisis will be “asymmetric”, as professors Santiago Carbó and Francisco Rodríguez warn.
In a next article “Economic Information Notebooks” of Funcas, The two experts highlight that both in Spain and in the European Union the measures are adopted in an “excessively gradual manner, in a trickle that could be insufficient to adequately respond to the urgency of the problem.”
Implementation also seems to them “too progressive and not very direct”, as happens, for example, with the ICO guarantee lines, although they argue that financing policies are “essential” in a context of a pandemic that slows down, and even paralyzes, economic activities.
In contrast with United States, the measures applied in Spain and the European Union are fundamentally through credit and not direct; In addition, in the Old Continent any idea of mutualising debt has been ruled out to date.
Capital entry and debt securitizations
Most aid is being articulated as financing, at least in what refers to the business environment, which “does not allow the sap to always reach the branches of the productive tree or, when it can, it is too late,” they explain.
However, they consider that there are still possibilities to expand support mechanisms in both Spain and Europe and cite, as examples, participative loans to strengthen the solvency of companies and the securitization of corporate debt (of companies of all sizes) to transform it in the short to long term and alleviate the financial effects of COVID-19.
The most vulnerable financially now are the self-employed and SMEs, but also large companies with a “highly strategic” component, such as hotels or airlines, which may require support, not only for liquidity, but also for solvency, they explain.
Mixed financing, which means “irrigation water” in the form of guaranteed credit and equity participation to “save roots,” is making sense – extraordinary right now, as Germany is doing intensely at the moment.
Carbó and Rodríguez also argue that providers can obtain liquidity from their short-term debts by an institution with public support, such as the ICO or the EIB, which would package “tens of thousands of these debts” to securitize them, that is, put them on the market as mortgage banking does.
In this way, they suggest, the ECB itself could acquire these securitisations and cushion the impact of the liquidity crisis on these companies.
Banking and late payment
The article highlights that Spanish banks present themselves before this crisis as “Active actors”, with possibilities of financing and relieving the pressure exerted by COVID-19 on companies and households, since they have a much more solvency and risk profile than at the dawn of the 2008 financial crisis.
Funcas experts also consider that financing with government guarantees can curb the credit shock, cushion the progress of delinquencies and help companies “bridge” the gap with transitional financing.
Even so, they applaud the fact that Spanish banks have placed themselves in a “realistic” position in advance, providing for expected losses considerably since the first quarter of the year, because it is “foreseeable” that delinquencies will increase significantly from the second quarter onwards. of this year.
“Initially, there can be rebounds in consumer credit, but its most significant effects will be felt in the business sector,” argue Carbo and Rodríguez.
It’s important to put attention on ICO guarantees will buffer any increase in delinquencies for the new credit granted, for the coverage up to 80% of the risk by the State.
All this would be partially reflected in delinquencies, with some delay, especially at the end of 2020 and in 2021, they foresee, although towards the middle of next year the delinquency rate would also decrease as the Spanish economy grows again.