• Budget closure. Hacienda highlights its "great containment effort" despite certifying that the deficit soared to 33,000 million
  • Covid 19.This is how Spain faces the coronavirus crisis: a skyrocketing deficit of 33,000 million and GDP in slowdown

The serious crisis caused by the coronavirus is going to provoke a historical collapse of the Gross Domestic Product (GDP) that, according to the forecasts that are consulted, will recover next year to a greater or lesser extent. But this situation will require and will also provoke a huge increase in public spending that, added to the lack of fiscal discipline of the Government, threatens to shape a fiscal bomb that will shoot this year's budget deviation up to 100,000 million euros .

"As the weeks of confinement pass, the return to normality will be more complicated and more effort will require. It is perfectly possible to return to the deficit levels of the crisis and yes, it is possible to reach a deficit of 100,000 million this year," explains María Jesús Fernández, senior economist at Funcas. In a recent document, the Savings Banks Foundation estimated that the deviation would be 5.5%, but that figure has been outdated in just a few days.

Firstly, due to the extension of the confinement measures and the worse prospects, and secondly, due to the bad data on the 2019 budget closure that was released last week. The final deficit data was almost 33,000 million euros, which represents an increase compared to the previous year and highlights the government's problems in sustaining its accounts and meeting its objectives. It is, without a doubt, a disease endemic to Spain that the Executive of Pedro Sánchez perfectly embodies, despite the fact that from the Treasury they emphasize "the great effort of fiscal containment carried out last year" and Economy points to communities and municipalities.

For this reason, Funcas will worsen its forecasts in the coming days and Fernández points out that the new data will hardly be less than 7% of GDP, which would already represent some 85,000 million, which, however, pale when compared with Bank of forecasts. America or Goldman Sachs. The first entity foresees a lag of 8.8%, which would give a figure close to those 100,000 million. Goldamn Sachs goes much further, predicting a deficit of 10% of GDP and, therefore, around 120,000 million euros, in addition to an economic collapse of 9.7%.

" Goldman always provides the most catastrophic forecasts. On the panels, his data always stands out as being more negative, so these figures must be taken with caution," point out government sources. "Funcas, on the other hand, seems to me to have been somewhat optimistic," they added from the Executive, thus agreeing with what Fernández announced about the need to review these data and making it clear that the Government is aware that the deviation It will be extremely high, although they prefer not to give a specific figure.

"Without a doubt, the deficit will be one of the big problems. There is no doubt that there is a risk of income falling, spending skyrocketing and within a year you will find yourself in debt and a deficit shot up. And at that moment the market will It does not matter if you have had to go into debt to face the coronavirus, "the executive continues, knowing that this crisis will raise the debt to more than 1.25 trillion euros.

Fear of a debt crisis

To all must be added the factor Italy, which reaches this crisis in an economic situation significantly worse than that of Spain and which this shock can leave very decimated. " Italy has a fairly black future that can infect Spain . It would be to get out of this crisis to enter another one but with debt. And then there is Euroscepticism, that if Italy is very touched it can increase and generate new uncertainties about the future of the euro "explains Fernández.

"Italy can generate a serious problem," agree the Government, while pointing out the importance of a mutualization as requested by President Pedro Sánchez but to which they are aware that it is very difficult to reach.

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  • Public deficit
  • Coronavirus
  • Covid 19

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