The counter resets to zero, or almost. When the Basque economy emerged from the tunnel of the 2008 crisis, the coronavirus and the consequences of confinement have devastated everything, like a tsunami. Almost a whole decade had cost to settle the recovery from the 2008 economic crisis, which came to Euskadi later than to the rest of Spain, as it was a more industrial economy and less dependent on brick, but it came with force.
After recovering industrial strength and placing the unemployment rate at the end of 2019 at 9.6% - below the 10% target set by the Basque Government - it was finally possible to recover the levels of registered Social Security affiliation in Euskadi in times prior to the crisis. All a symbol of triumph over the crisis. The figure, 980,596 affiliates, was registered in the month of December, just over half a year ago.
Now there are only 946,886, the lowest number since September 2018, and at the end of the year the Basque Government estimates that employment will fall by 7%, representing some 68,000 lost jobs. When December arrives, 13.7% of the Basque working population will be unemployed due to the economic slowdown forced by the Covid-19.
"This is for me the most difficult appearance of the legislature, the situation is complicated," acknowledged the Minister of Economy and Finance of the Basque Government, Pedro Azpiazu , in the intervention in which he announced in early June the revision to the drop in all economic forecasts with a drop in GDP of 8.7%. A considerable break for the economy considering that the forecasts in January pointed to a GDP growth of 1.9% and the creation of 11,500 jobs. In the worst years of the previous crisis, the Basque GDP registered decreases that did not exceed 4%. The consequent hole in the public coffers will also be considerable. The Basque Provincial Treasuries, which by the Economic Agreement have the power to collect taxes, foresee a drop in collection this year of around 18%, which translates into some 2,000 or 3,000 million euros , still to be determined. "It will take us three years to recover what we have lost in three months," said Lehendakari Urkullu.
A pending campaign of the economy
The economic environment in which the 12-J elections will take place and which the government that comes out of the polls will have to face is so radically opposite to that which existed when the Basque Parliament was dissolved in February with the intention to hold the elections on April 5, which is not surprising that the economy is conditioning the electoral campaign that began on Thursday. The economic situation and the recipes for dealing with reconstruction after the pandemic stop focus most of the messages from the parties. The priorities of the citizens have changed and the economic situation, together with the health crisis, of course, are at the forefront of the concerns of the Basques. Even more so when the consequences of the fall of the economy are still unpredictable, and uncertainty governs the possibilities of the Basque recovery as well as for the world economy.
Euskadi is not an island economically, quite the opposite, firstly because it is highly interrelated with the outside world because it is highly exporting. Therefore, the uncertainty is total about what will happen from now on. Most analysts agree on this, although the calculations of the Basque Executive point to a rapid increase in 2021, with an increase in GDP of 6.7% and the recovery of 48,000 jobs next year.
But everything remains conditioned on how the pandemic evolves and how the recovery is arbitrated in the countries with which the Basque Country has a greater commercial relationship. Initially, it depends on the recovery of the German, French, American, English and Italian economies, the top five in the ranking of Basque exports and, of course, the evolution of the Spanish one.
The industrial engine
The Basque economy is highly industrial, something that is both a strength and a condition for recovery. The president of the Basque businessmen, Eduardo Zubiaurre , always remembers that "if an industry closes it is much more difficult to recover that loss than in any other sector", such as in services.
As reported by the Basque employers in the "Business Thermometer of the Impact of the Covid-19" , published this June, between the months of March and April 2,107 companies were lost, more than those recovered during the last years of economic growth, although in May, with less impact from the pandemic, 30% of them recovered.
It is true that the Basque Country and its companies have experience in recovering from crises and rising from their ashes like the phoenix and seeing the crisis as an opportunity to emerge stronger. It has already done so in others, very profound, such as the devastating industrial restructuring of the 80s and 90s, which even changed the landscape of Basque cities, cleaning them of industry and making them friendly for tourism. The Basque economy was reinvented then, and will try to reinvent itself now.
Although everyone agrees that nothing will be the same as before the pandemic, it is true that the Basque Country faces this challenge in healthier conditions than other economies. From the outset, at the end of 2019, the Basque economy chained six consecutive growth exercises, since 2007 it has a deficit 0, and a current indebtedness of 12.6% of GDP, the lowest of all the autonomous communities, which places it with greater capacity to face the debt that will be necessary to face the reconstruction.
Undoubtedly, the Basque Country is an eminently industrial sector. This sector accounts for 24.2% of GDP. There are many large industrial companies that have stayed on the path of successive economic crises - Altos Hornos de Vizcaya, Euskalduna, La Naval de Sestao ...- but the sector has managed to compose itself, open up to new sectors and bet clearly on innovation and by Industry 4.0, adapting to technological changes.
Investments to leave the pandemic behind
A sign that this sector is still the hope for the Basque recovery today is the fact that in times of pandemic, just out of confinement, three major industrial investments have been announced that have put a note of optimism in the desolation figures. The first from Repsol , for 80 million euros; the second from Gestam , for 17 million for an R + D + i center for the development of the electric car, and the third from Iberdrola in the largest solar park in Álava, which will have an investment of 70 million. It is true that the last two are the result of public-private collaboration, that is, they have the participation of the Basque administration, but they are a sign that the Basque Country continues to pull to capture industrial investments.
It is no coincidence that these three investments have to do with the energy and automotive sectors, since they constitute some of the most important, not only in terms of large companies with headquarters in the Basque Country -Iberdrola, Petronor (a subsidiary of Repsol), Mercedes Benz, Vitoria, Gestamp- but to the industrial fabric that is woven around them and that has led to constitute a large sector of components for the automotive industry and also suppliers of energy companies. In fact, the Basque machine tool represents 90% of the sector in Spain and the appointment of the Biennial Machine Tool Fair is one of the most important in Spain.
All in all, the Basque Country, and at the expense of what the pandemic allows, is, and especially for a few years, much more than industry. Tourism, driven in principle by the Guggenheim effect , has become an essential sector in the equation of the Basque economy, promoting the service sector. At the end of 2019 it was 6.1%, and it employed 107,000 jobs.
The tax debate to tackle
It cannot be denied that the fact that the Basque Country has a tool such as the Economic Agreement, which gives the three Basque Provincial Treasuries the capacity to collect and also to legislate certain taxes constitutes a differentiating point to take into account in the ability to overcome the crisis what's next.
The debate on tax reform will have to be addressed after the elections, especially taking into account the expected loss of collection of around 18% and which cannot be solved only through debt.
On the table of the Basque Provincial Deputations, on which the haciendas depend, and which are currently governed by the PNV-PSE coalition, only the possibility of abolishing the Wealth Tax to avoid the flight of companies to other communities that until now they have already suppressed it, like the one in Madrid.
The last Basque tax reform dates from 2017, after an agreement between the PNV and PSE with the PP so that the popular support the budgets of the coalition government. This reform lowered the Corporation Tax four points to 24%. The pandemic has reopened the debate on the need to modify taxation, but the proposals on which taxes should go up and which ones should not, differ according to political formations.
Debt will be essential to safeguard and strengthen public services, something in which all parties agree. Despite the worrisome situation, many experts agree that the Basque Country will emerge from this crisis as it has from previous ones.
"This looks like a gallery, it comes out of nothing, there is a storm, but it passes quickly," says Íñigo Calvo, professor at the Deusto Business School. "Many analysts agree that in June of next year the situation may be under control. That it is a limited crisis in time serves to organize us."
Also the UPV-EHU Professor of Economics, Sara de la Rica , sees the future with optimism. "I don't see a general debacle like 2008," he says. Although she remembers that the Basque labor market has an excess of temporality that has led to the loss of many young people. "That is one of the first issues that must be addressed as soon as the exit is seen." "The Basque Country has solid foundations, the crisis may be an opportunity, but we have duties."
According to the criteria of The Trust Project
Know more- GDP
- Spain
- PNV
- PSE
- Álava
- Social Security
- Basque Country
- PP
- Madrid
- Unemployment
Economic NewsThe transformation of Endesa told by José Bogas: "This crisis comes with 'green' investments"
CoronavirusEmployers of nursing homes denounce in Congress that they asked the ministers for help and only received reproaches
EmpresasFrance studies extending ERTEs up to two years
See links of interest
- Last News
- Programming
- English translator
- Work calendar
- Daily horoscope
- Santander League Ranking
- League calendar
- TV Movies
- Cut notes 2019
- Themes
- Aston Villa - Wolverhampton Wanderers
- Athletic Club - Mallorca
- Celta de Vigo - Barcelona
- Brescia - Genoa
- Atlético de Madrid - Alavés