The line of guarantees for investment of 40,000 million fails

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The Covid-19 crisis forced the Government to react desperately to contain the blow of the pandemic on the economy. The confinement decreed in March had – and still has – atrocious consequences on the productive fabric. For this reason, the Executive launched measures such as 100,000 million in guarantees from the Official Credit Institute (ICO) for liquidity of companies and freelancers. Some lines of guarantees that all institutions recognize as a success. However, the effectiveness has not been even close in the 40,000 million in extra guarantees for investment that were announced in July. Have no demand and its failure at this time is assured.

On July 3, an extraordinary Council of Ministers gave the green light to this new departure. «In order to promote the economic recovery of the country, the Ministry of Economic Affairs and Digital Transformation will grant guarantees for financing granted by supervised financial entities to companies and the self-employed to meet, mainly, their financial needs derived from making new investments “, reads article 1 of the decree that approved those 40,000 million. A measure applauded on paper, but which over time has proven useless in the current situation.

Various financial sources explain to ABC that the demand for these loans guaranteed for investment is very low. Few are willing and able to undertake new investment projects in Spain. In this sense, the sources consulted suggest that the Executive made a mistake in the timing of the implementation of these public guarantees because what companies and the self-employed needed at that time and now are not these lines but new fiscal policy measures to help them survive. That is the most repeated word, survival, in relation to the panorama that companies are enduring in our country.

The companies appreciate the Government’s effort regarding these ICO guarantees, but the sources consulted suggest that this is not the time to think about more debt from the private sector to invest. And to this is added a recurring problem these months at the expense of the continuous messages from the Executive that there will be tax increases. The productive fabric needs an environment of certainty and trust, they say, to think at least about going to these lines. With contradictory messages between ministers and “illusory accounts”, as reported by certain sources, there is no breeding ground to invest.

The failure of the 40,000 million in guarantees is served today, taking into account that have been in operation for more than a month. All financial entities are attached to the ICO framework contract. And in the more than 30 days that they add operations, no interest has been detected. More serious if possible when remembering that the Ministry of Economic Affairs announced this departure on July 3 and took more than two months to carry it out. Today’s date guarantees are available (released) for 5,000 million for SMEs and freelancers and another 3,000 million for large companies. Although given its almost null acceptance, everything indicates that its period of validity will have to be extended beyond the legal term.

Ana de la Cueva, Secretary of State for the Economy, said on Monday at the financial sector forum organized by “Expansión”, together with KPMG, Microsoft and American Express, that the ministry led by Nadia Calviño is studying reviewing the time frame of the grants, in general. “We are analyzing with the supervisors and the sector in order to channel the support instruments in the best way during the coming months to avoid an instability situation,” he commented, in clear reference to extending the grace periods of the approved lines in March for liquidity, although hinting that that extension of terms could also cover these 40,000 million in guarantees for investment that the Executive wants to promote. I want and, for now, I can’t. Now the deadline to request these guarantees is December 31, 2020.

Above all, the references made by the Government to this failed line of public support in the budget plan recently sent to Brussels are striking. In the document the Executive gets chest out of having mobilized more than 200,000 million euros for the Spanish economy, within which these guarantees are included.

“All the measures that the Government has adopted throughout these months are being vital, since they have been designed and implemented in order to cushion the impact of the pandemic on economic activity, employment and household income, for so lay the foundations for economic recovery»Explains the plan. It is striking to see this reference in the document regarding “all the measures” adopted, classified as “vital”, taking into account that these 40,000 million in guarantees are hardly having any implementation.

Its situation thus contrasts with the liquidity lines for March. Under the ICO umbrella 841,111 financing operations have been formalized, for an amount of 103,847 million, of which 78,924 million have been guaranteed by the State. Their concession rate has been greatly slowed down in recent months, although broadly speaking they have performed their function efficiently, as recognized by the Bank of Spain.

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