Government adopts urgent measures to prop up liquidity and business solvency

Moncloa Palace, Madrid

The Third Vice-President of the Government and Minister for Economic Affairs and Digital Transformation, Nadia Calviño, claimed that the measures approved on Tuesday are on top of the "decisive and coherent" response by the government in social and economic areas to protect the productive fabric, jobs, family income and to foster the economic recovery.

In this regard, Nadia Calviño recalled that the government activated a line of guarantees for companies and independent contractors for a total amount of 100 billion euros on 17 March, which led to the approval of more than 881.000 operations - 98% with SMEs and independent contractors. Subsequently, it mobilised another line of guarantees through the Official Credit Institute (Spanish acronym: ICO) for the sum of 40 billion euros and set up the Fund to Support the Solvency of Strategic Companies, with a provision of another 10 billion euros to address their potential solvency problems.

Nadia Calviño indicated that these and other measures are proving to be effective, but they need to be adapted to help business projects that were sustainable until the outbreak of COVID-19, but which now may be suffering from liquidity problems or equity imbalances stemming from the extraordinary circumstances.

Content of Royal Decree-Law approved on Tuesday

Foto: Pool Moncloa/JM CuadradoThe Minister for Economic Affairs explained that the new legislation introduces measures related to the ICO line of guarantees and to bankruptcy legislation.

Accordingly, the deadline for the granting of the two lines of ICO guarantees is extended until 30 June 2021. In addition, the maximum deadline for the loans guaranteed is extended so that those clients that request this may extend their loans for up to eight years with a two-year grace period.

The Third Vice-President of the Government highlighted that by taking these measures, "independent contractors and companies will have their financial burden significantly alleviated and be given more time to recover their activity and meet their obligations". The measure, she said, will "very significantly" protect the sectors of tourism, leisure and culture, consumer goods, the textile and fashion industry and retail trade, which account for almost one third of the operations to receive an ICO guarantee.

The Royal Decree provides that financial institutions must maintain the limits of the financing of working capital until 30 June 2021, and may not increase, without justification, the interest rate or demand that other indexed products be taken out by their clients, while they must respond to applications to extend loans within a maximum period of 30 days. It also provides for a 50% reduction in notary and registry fees to formalise these extension operations.

In order to facilitate access by companies to sources of alternative financing to banks, the threshold from which growing SMEs must switch from the multilateral trading system to the continuous market is doubled from 500 million to 1 billion euros.

Additional measures

The measures contained in the Royal Decree are in addition to those agreed at the Government Delegate Committee for Economic Affairs to strengthen solvency and business financing.

Firstly, an extraordinary line was set up to cover working capital loans with a provision of 1 billion euros. Then the special line of guarantees for loans and working capital for SMEs and unlisted companies was increased by 100 million euros, and finally a new line of guarantees for listed companies was approved for a sum of 1 billion euros in force until December 2021.

Bankruptcy measures

Foto: Pool Moncloa/JM CuadradoNadia Calviño underlined that the suspension of the duty to apply for a declaration of bankruptcy is extended until 14 March 2021, together with the obligation on courts to admit such applications. And the provisions whereby courts do not admit applications on grounds of a breach of creditors' agreements and refinancing agreements are extended until 31 January.

Furthermore, the prior authorisation for direct investments made by residents of other European Union countries or of the European Free Trade Association is extended to 30 June 2021 for listed companies or for investments in excess of 500 million euros in unlisted companies in strategic sectors.

The minister also recalled that the deadline for the exchange of pesetas at the Bank of Spain has been extended until 30 June 2021.

In addition, the deadline for general shareholders' meeting to be held electronically, even though not provided for in their articles of association will remain in force throughout 2021.

Drop in the price of face masks and health material to combat COVID-19

The Royal Decree-Law includes a reduction in the maximum price of disposable surgical face masks of 25%, as agreed by the Inter-ministerial Committee on Prices of Medication last Thursday. Their price will drop from 0.96 to 0.72 euros and will be even lower with the entry into force of the lower VAT rate, which will drop to 4%, as announced last week and be introduced under this new legislation. This rate will remain in force until 31 December 2021.

The aim, said the Minister for the Treasury and Government Spokesperson, María Jesús Montero, is for "no population group, particularly the most vulnerable" to be prevented from acquiring obligatory protection material against the virus.

In addition, the application of the 0% VAT rate on the import and acquisition of health material for public and private health centres and social entities will be extended until 30 April 2021.

Other measures

The new legislation provides for the approval of a supplementary loan of 6 billion euros to guarantee the financing of the social security system and an extraordinary loan of 2.3 billion euros for the Public Employment Service.

María Jesús Montero stated that this will guarantee that the safety net set up due to the impact of the pandemic can be maintained, with such measures as the Temporary Lay-off Plans (Spanish acronym: ERTEs) and the provision for the self-employed for the cessation of activities, the pension system and to guarantee contributory benefits and unemployment benefits.

Lastly, tax measures and breaks to incentivise the culture sector and automotive sector will be adapted to EU legislation.

Rounds of proposals to hire research staff

Foto: Pool Moncloa/JM CuadradoThe Council of Ministers approved subsidies for the amount of 148 million euros to hire researchers on a competitive basis, which will fund and incentivise the training and specialisation of public and private sector researchers in R&D+i.

These rounds of proposals include the Ramón y Cajal and Juan de la Cierva programmes, which will receive a funding increase of 30% this year, rising from 650 to 803 subsidies. According to María Jesús Montero, this will thus comply with the Action Plan for Science and Innovation, which includes such goals as increasing programmes to attract and retain research talent.

Other subsidies exist for Technical Staff to Support R&D+i, with 170 employment contracts, Torres Quevedo personnel, which will facilitate the incorporation of 200 doctors in companies for three years and Industrial Doctorates, which will provide for the training of 60 pre-doctorate researchers in companies.

Current affairs

The Government Spokesperson stated that in the fourth week since the declaration of the state of emergency came into force on 25 October, the figures for cases of COVID-19 still remain high, but the drop in the accumulated rate for the country as a whole shows that "we are moving in the right direction" and she stressed that we must continue to strictly apply "the recommendations of the health authorities".

María Jesús Montero announced that Thursday's European Council, which will be attended by the President of the Government, Pedro Sánchez, will focus on the European Union's response to the pandemic and the programme to acquire vaccines. One of the companies it is negotiating it with, said María Jesús Montero, is Moderna, which has announced this week that its vaccine, in clinical trials, has proven to be almost 95% effective.

The minister praised the constitution, on Tuesday, of the Social Dialogue Board for the Recovery, Transformation and Resilience, and the role played by the trade unions and business organisations, "which have appreciated this unprecedented moment our country is going through, and are decisively contributing to the recovery through different lines of work under way".

María Jesús Montero also backed the parliamentary dialogue to approve the National Budget for 2021, "which is absolutely necessary" to enable the economic recovery, guarantee income for all workers and harness the injection provided for through European funding.

Non official translation