The credit rating agency Moody's expects the Pedro Sánchez government to go to the European Stability Mechanism (Mede), the European rescue fund, to cover the increase in its debt after the coronavirus crisis.
"We hope that Spain will activate the MEDE line of credit for expenses derived from cornavirus along with other countries and that it will be a key recipient of the EU unemployment insurance fund (Sure)," the agency's analysts say to justify by which currently maintain Spain's solvency rating at Baa1, which is a high pass.
Moody? S adds to his arguments that the European Central Bank will acquire, according to his calculations, 114,000 million of Spanish public debt , within the gigantic aid program approved by the institution that Christine Lagarde presides over last month to help the most vulnerable countries in the euro. "Overall, European institutions could effectively cover about 59% of Spain's total gross borrowing needs, " estimates Moody's in a report to investors around the world.
As this newspaper published last Monday, the Treasury needs to place some 300,000 million debt on the market this year, 50% more than expected and a record that makes it difficult to avoid European financial assistance.
The Government officially maintains for now that it "does not contemplate" going to the Mede, whose special line for the virus would consist of loans of some 25,000 million in the case of Spain and that open the door to a broader rescue from the ECB. Italian Prime Minister Guiseppe Conte revealed last week that Sánchez was interested. In any case, it is a preventive line that would not officially have the conditionality of adjustments that the Mede had in the past as it was the response to a pandemic, but implicitly will make it difficult for the Government to request it to deviate from the euro budget rules.
Sánchez is just in case focusing his efforts on another fund, a future one called Recovery, in which he does not want aid to be loans, but subsidies so as not to further increase his debt, but he is encountering resistance from Northern countries, including those led by governments of his socialist family.
According to Moody's estimates, the Spanish economy will fall 8% this year and will barely recover 4.8% in 2021 , so the recovery will not take the form of letter V. It predicts that the public deficit will sink to 7.6% of the Gross Domestic Product in 2020 and that both this year and the next, public debt will exceed 110% of GDP, compared to 95.5% in 2019.
Moody? S believes that the "budgetary deterioration will be temporary" and that "the financing conditions will continue to be favorable", but points out that the aid program announced by the Government to help companies and workers has a cost "still uncertain " In any case, it threatens to downgrade the rating if the government makes "a broad repeal of reforms , particularly the labor and pension reforms ."
On the contrary, he believes that Spain's score could improve if the Spanish economy recovers "quickly" from the coronavirus and the Government undertakes " a strategy of budgetary consolidation [adjustment] for the coming years that is based on structural measures" . In particular, he believes that the Government should focus on increasing the competitiveness of the economy in light of the aging population.
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