Public spending

Public spending

General idea

An unprecedented crisis is upon us. At first we believed that a slowdown in economic activity would cause a downturn in the country’s economy, but that it would gradually recover in the famous asymmetric V. The data collected to date show that not even in our best dreams will this prediction come true.

What is happening?

With the data collected so far we can see that even in our best dreams this prediction will not come true.

Some experts believe that our recovery will be in the shape of a K, i.e. technology companies… all those related to a more digital future, will be attributed the growing stick of the K, while practically all those that cannot be transformed into digital companies (tourism, hospitality…) will tend towards the decreasing stick.

Our economy offers a year-on-year fall of 20% (at least), and many economists are looking to public debt as the solution to this huge problem.

With this theory, they argue that many companies cannot sustain themselves due to the situation we are in because of Covid, and this public spending is intended to finance these companies in order to keep them afloat.

This solution would be efficient in the short term, I mean, if our economy was not sustainable for a short period of time, because we could help them in that period and later, when everything was in order, they could continue with their economic activity themselves.

The problem is that we are not in a crisis that is going to end in a couple of months. This crisis is going to produce a multitude of changes in our economy, in our society and its culture, and many sectors will never be the same as they were before, so if we dedicate ourselves to subsidising companies that are not going to recover, we will be creating zombie companies, which are not going to produce profits because there is not going to be a demand from that market.

Another of our big problems is our current public debt. We are not exactly a country that lacks little debt and we can buy it at will. Our public debt at the end of the year is expected to be around 115-120%, so if we were to embark on a public debt solution it would soar even higher.

Some may say well, when our economy shows a surplus we will be able to pay that debt, and that is true, but if we look at how we have been managing our debt when we had public surpluses in the last 5 years (with the exception of 2019), we would see that we are not very good at balancing our budgets in order to lower our debt.

By this I do not mean that we do not have to rescue sectors of our economy, but I do believe that our government should segment aid by companies, as we do not have infinite debt.


Finally, I believe that we should reconfigure our productive fabric, adapting it to current needs, by means of a digital transformation in all sectors that we believe 100% that they will be able to continue their activity in the battle against Covid-19.


Leave a Reply

Your email address will not be published. Required fields are marked *

Captcha loading...

Be sure to contact me if you have any questions!

Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.