Few had imagined they would ever see the day when the European Commission would nudge Spain to increase spending. That day has come following a pandemic and an unprecedented economic crash. After lifting the caps on national deficit and borrowing, the Commission has advised all member states to step up spending in order to soften the blow of the crash and pave the way for recovery. After years of pushing an austerity agenda, now Brussels is asking Spain to do whatever is needed and then some. Specifically, Europe wants to see more spending on health care, an area where it has identified structural issues —brought about by the budgetary cutbacks— as well as coordination problems with the regional governments. Now it is time to spend, we’ll worry about other stuff later. Such is the Commission’s message, which also emphasises that, once the Covid-19 crisis is over, it will be time to concentrate on the deficit and national debt, once again. In a damning report, the Commission states that “the pandemic has revealed existing structural problems, some of which derive from certain shortfalls in investment in physical infrastructures and shortcomings in the recruitment and working conditions of health workers”. It also warns about regional disparities in terms of spending, physical resources and staff.
These are some of the issues which the Spanish government is expected to address first. But the public health care system is not Brussels’ only concern. The Commission also mentions shortcomings in the job market which Spain already exhibited before the pandemic, with one of the highest unemployment rates in the EU, a high incidence of temporary jobs and many people at risk of poverty or social exclusion.
This is why now Brussels is asking Spain to step up spending on employment and to ensure that benefits reach the families who have been worst hit by the crisis. Europe is particularly concerned about regions that are highly dependent on income from tourism, such as the Mediterranean coast, Andalusia, the Balearic and Canary Islands, where they expect the crisis to be even more severe. The report claims that “preliminary data point to a very significant increase in the level of unemployment in Spain as a result of the crisis, which will weigh on the already limited capacity of employment services to support workers and employers and on social services”.
Poor coordination with regional governments
“The coordination between different levels of government is not always effective”. Without going into detail, the Commission acknowledges that the Spanish government is struggling to coordinate public health policies and the lifting of the lockdown restrictions with the country’s regional authorities. This comes as the debate on whether the state of emergency should be extended is raging. Spanish government sources have reacted to the Commission’s advice by stating that “we have strengthened our coordination efforts with the regional governments” and, more widely, they argue that the public health system has been boosted, too.
Pedro Sánchez’s administration also points out that they have improved the capabilities of the national health service with additional staff and it concludes that Brussels’ recommendations are in line with the Spanish government’s economic policies.
Renewed concern about the deficit
Brussels’ new discourse is entirely at odds with the response it gave to the previous recession, when it insisted on cutting spending and rushed to impose an austerity agenda which was eventually put into question. This is why now the European Commissioner for Economy, Paolo Gentiloni, has stressed that this time around the EU cannot afford to “make the same mistakes” it made in the past, with “public spending as the first victim of the crisis”. Gentiloni has also insisted that the recession should not widen the gap between countries, regions and citizens.
At the same time, Brussels has noted that eventually Europe will need to return to a “prudent” fiscal policy. That is, to bring back the policies needed to curb the deficit and public debt whose targets Spain had failed to meet in 2019, as noted in the Commission’s report. Valdis Dombrovskis, the Executive Vice President for an Economy that Works referred to this, as does the Council Opinion on Spain when it points out that Spain’s public spending was excessive. That’s why Madrid also insists that “we will get back on the path of reining in our deficit and public debt once the economy has recovered and we remain firmly committed to our budget target”.
This has also prompted the Commission to insist that the relief package for member states that will be unveiled next week must be tied to “structural reforms” and follow the recommendations issued every six months. Southern European countries are concerned about this condition because it involves making cutbacks, but their northern European partners feel it is only logical to demand reforms and monitor the spending of funds contributed by all member states. The Prime Minister of The Netherlands, Mark Rutte, said that much on Wednesday this week.