Spain on Friday, March 12, approved an 11-billion-euro relief package to help its tourism and hospitality sectors, hit hard by coronavirus-related curbs on travel and mobility, stay afloat until summer.
The measures, which include 7 billion euros ($8.35 billion) in direct aid, were broadly in line with what Reuters reported on Thursday, March 11.
They are mainly aimed at helping companies cut excess debt, though the government says any aid is not expected to be distributed before the end of April.
Spain has experienced one of Europe’s worst coronavirus epidemics, with around 70,000 deaths, and Economy Minister Nadia Calvino said that, with the arrival of its third wave in January and February, the country’s economic recovery had flagged.
“The duration and the economic impact of the pandemic increase the risk of overindebtedness,” Calvino told reporters after a cabinet meeting.
The package will include 3 billion euros through debt restructurings of state-backed bank loans to companies and 1 billion euros in capital injections, and government officials said a moratorium on mandatory bankruptcies will be extended until the end of the year.
Companies whose revenues have fallen at least 30% compared to 2019 will be eligible for aid of up to 200,000 euros to bolster solvency.
The direct aid component includes 2 billion euros for companies in the Balearic and Canary Islands, two regions most severely hit by the tourism slump.
Germany on Thursday removed the Balearic Islands from its list of coronavirus risk areas.
Debt write-offs ‘a last resort’
Calvino said any potential write-offs of state-backed bank loans to companies would be a “last resort,” backed by a code of good practice to be approved by the Cabinet.
The code will involve coordinating creditors so the actions of one bank do not impact other lenders, a government source told Reuters.
Friday’s decree allows state bank Instituto de Credito Oficial (ICO), whose credit lines have been extended until the end of the year from end-June, to forgive debts as long as banks also agree to do so, Calvino said.
The removal of automatic and compulsory write-offs has been seen by the financial sector as a softening of an original proposal which ran into opposition from lenders, which were concerned about possible compulsory debt haircuts.
ICO, which bears up to 80% of potential loan losses on SME credits, has granted 91.5 billion euros in funding lines. – Rappler.com