Galician economy recovery is possible
Santiago Lago Peñas, Economics Professor
at the University of Vigo, director of the research group GEN and the Galician
Economic Forum and member of ECOBAS, considers that the keys to recovery are on
respect for public and occupational health measures, political and social
dialogue and in appropriate economic plans.
"It is a time of generosity and cooperation, of loyalty and mutual
respect and of seeking elements of agreement"
Professor Santiago Lago, who
participated as coordinator in the committee of experts created by the Galician
Regional Government for the recovery of economic activity after the Covid-19
crisis, is optimistic about the recovery, but he warns of the need for joint work
among all the actors involved.
The Economic Forum of Galicia,
led by Santiago Lago and with the help of José María Da Rocha, has designed
three possible scenarios to get out of the crisis. "The first, the one we
want and consider the most likely, involves a very substantial fall in gross
domestic product (GDP) in 2020 as a whole (-8.5%), but also a gradual recovery
from the second half of the year; and it would allow us by 2022 to reach the
level with which we ended 2019. The second, which is not disposable, is that
reactivation will be more difficult. If the measures of distance, the
limitation of capacity, the loss of confidence, etc. throw sandbags on the
wheels of large economic mill, we would approach the -13%. The third, most
hypothetical, is that we have to go back to lockdown, as we did in the third
trimester. In this case, we would approach -19%. Taking this into account, the
dynamization and normalization that begins now must pivot in three essential
elements. The first: maximum respect for public and occupational health
measures. The worst that can happen to us is to return to the lockdown. The OMS
has warned this and Galicia figures confirm this. The second: smart and
accurate economic plans, well implemented, that sequentially solve the
extraordinary challenges that lie ahead to prevent short-term problems from
becoming structural. The third: political and social dialogue to find solutions
that share costs in a reasonable and equitable way, to focus on the important,
to work together, explains the professor.
Galician industrial activity has grown threefold that the Spanish
industry as a whole in recent years
structure is solid. The weight of its industry in the whole of Spanish (5.8%)
is clearly superior to the overall weight of the Galician economy (5.2%). In
particular, Galician industry produces 11% more than our economic size. We are
industrial. The result is a consequence of what has happened in the last two
decades", he says. Despite having a lower visibility, Galician industry is
one of the economies that has grown the most on the regional map since 2000;
more than the "industrialists" Catalonia and the Basque Country.
Behind this positive result are large companies such as Inditex and Citroën,
but also many other companies from the four provinces, almost all of them
family-owned with recognized surnames. " Undoubtedly,
we have industrial companies in crisis and with problems; some of them create
enormous challenges on a regional scale. But also we have others that today are
much stronger than there are ten or twenty years".
Tourism, hospitality, culture and leisure sectors will be the most
affected by the crisis
After the initial lockdown,
many companies have been able to resume their activities and their situation is
now fairly normal. The problem now lies in the branches and companies in which
the new rules of social distancing have a full impact on them (tourism,
hospitality, culture and leisure, sport...). "They are an important part
of our economy, and if these sectors are half-way or unemployed, they affect
the whole," says Professor Lago.
"ERTE is a good solution
for dealing with the effects of the abrupt interruption of economic activity.
In fact, what we are discussing now is in what branches and companies and even
when to extend them. As far as the living minimum is concerned, it was a
programme that was already planned and that the crisis accelerated. It is also
moving in the right direction, although there are concerns about the effects on
the black economy and the disincentive to work. We will have to be very
vigilant and adjust the IMV to the observed reality".
The committee of experts of
the Xunta has been searching for formulas and proposals for the recovery, some
of the measures they have proposed can be seen in the following report: http://www.conselleriadefacenda.es/documents/10433/26507679/Informe-Completo-gal.pdf/d93ea3c4-6223-463a-9204-dff293a641db.
The way out of the crisis will be through an increase in public debt and
the nationalization of companies
“Public debt is not so much the tool as the
consequence of supporting the whole system with public money so that it does
not collapse. I don’t think that at this moment the growth of the deficit or
the debt should be the thing that worries us the most. It’s inevitable. And as
for the concrete measures to be taken, what some consider heterodoxy and
anathema is simply inevitable: temporary and ad hoc nationalizations are now
within reasonable options", the economist confirms.
Santiago Lago also says that
Spain is in a very bad fiscal position, and we will have to rely on community
support to get out of the crisis. "We are one of the countries in the
European Union with the least fiscal space because of our high public debt and
the large structural deficit that we carry. If in the 2009 crisis we were one
of the most proactive countries in the world in the fiscal field, today we are
among the least in the European Union. Germany, for example, is being much
Given the controversy caused
by the lack of european support in the first weeks of the pandemic, the
professor believes that we all have our share of blame for the lack of
understanding. "The preferences on fiscal stability are different in
different European countries and there is no concept of European citizenship
that supports the flows of inter-territorial solidarity that exist within
countries, as we analyze in this
article published together with Albino Prada and Alberto Vaquero in 2015. It
is true that this is an extraordinary problem and that it is in the interests
of the whole of the European Union (and also of the Netherlands) to apply
strong fiscal incentives throughout the Union. However, we Spaniards also have
to understand that we cannot maintain a structural deficit of 3% indefinitely and
take the fulfilment of fiscal objectives seriously".
"We are in uncharted territory"
Like any economic crisis, this
situation will lead to a worsening of working and business conditions. We
cannot compare it to any previous economic crisis because of its intensity and
origin. Professor Lago stresses that this is the first time in history that the
economy has stalled for several weeks and then started with changes in the
rules of social interaction.
Massive Globalization of Capital once again questioned
"Undoubtedly, betting on
globalization in the traffic of capital, people and goods and not in the field
of policies (public health, environment, security...) is a symmetry that would
sooner or later take its toll on us. I am confident that the crisis will serve
to strengthen an institutional framework that can deal with global public
goods. As far as we are concerned more urgently at the moment: we need
multilateral bodies with much more resources and powers; as a capacity to
decide to close state borders to control the outbreak of a pandemic", says