The Key to a Sustainable Economic Recovery

A group of experts in finance and economics, all former students of the British school Caxton College, identify problems and practical solutions in addressing the economic crisis that the pandemic has caused in Spain.

The reactivation of productivity is one of the most significant concerns of social, economic and political entities, both in Spain and in the rest of the world’s countries that have been so drastically affected by the Covid-19 pandemic. With a more optimistic outlook now that vaccines begin to be a part of our daily lives and contagion is more under control, we may find ourselves at a turning point where we can start the long road to recovery.

One of the possible paths to recovery is through the receipt of funds from Europe, so their management of the situation is key to stimulating Spain’s economy and restructuring the production model. Andrea Antón, a financial analyst with OpenMarket, a multinational firm with an office in London that advises companies such as Amazon or Microsoft, said that ‘a monetary influx doesn’t necessarily imply a successful recovery. It’s essential to establish which changes should have the greatest priority, as well as to designate who is directing these changes. Also to define which investment initiatives are necessary to stimulate the Spanish economy in the long term, because just looking for a solution for 2021 is not enough’. Another perspective was provided by Borja Escrivá, Senior Manager in the regional tax department at PwC España, who said, ‘The political and social environment must be stable and the legal system must not be a risk for investment. The most important thing is for businesses to know what the playing field is like’.

Creating more jobs

Can labour market reform help economic recovery? Juan Manuel Muñoz, investment director at Grupo Atitlan, tried to answer this perpetual question in Spain. ‘The best asset for any government is to be able to turn an unemployed person into an active worker because this has a double effect: cost is eliminated and future income is created. This is why policies that promote employment are essential, offering businesses tax or other incentives to increase employment numbers’.

On the same subject, Borja Escrivá added that one of the main obstacles to resolving these issues is the lack of consensus. ‘It’s useless to reform labour laws if businesses fear that in a few years they could change again’. It seems clear that ‘the current labour model is antiquated and slows down the country’s economic progress. Modernisation of our labour system, so that it is equivalent to other European economies such as Germany or the UK, is essential in order to promote economic growth in Spain. It’s not just about creating new jobs, but also adjusting the quality of them to the current situation’, said Andrea Antón.

Increase in taxes

The public expense that the government has had to take on during the pandemic in order to ease the complicated labour situation means that, in the words of Andrea Antón, ‘Spain’s public debt will result in an increase in taxes, since this is one of the most effective ways a country can raise money and be able to return the EU’s loans’. Borja Escrivá questions the measures that have been proposed up until now because ‘they will have little effect on the public coffers’.

Juan Manuel Muñoz went still further and gave suggestions to resolve the problem. ‘The most important thing is not the debt in itself, but its size in relation to the country’s GDP. There are therefore two options which are not mutually exclusive in order to reduce the debt: increase the GDP or decrease the debt. Regarding the first, measures that have been adopted have allowed us to keep the economy alive (and many other countries have adopted similar measures) to avoid reduction of the GDP in the short or medium term. Regarding the second option, the only alternative is to generate surplus, and this can only happen by reducing spending or increasing income, neither of which is good in the short or medium term’.

Looking forward

All of the experts agreed that the situation caused by the pandemic has resulted in both good and bad decisions that we can all learn from for any future crisis. They also agreed that it’s important to find the right balance between public health and keeping the economy going. On a business level, they share the opinion expressed by Juan Manuel Muñoz to ‘reverse offshoring and return production capacity to the EU and USA’. Borja Escrivá concluded by saying, ‘In Europe we have abandoned industry, which has principally moved to Asia, and research and development, which is dominated by the US. We must recover these sectors in order to ensure a stable economy when a sector as significant as tourism declines’.