Brussels authorises new framework for direct aid to Spain

Economía maintains its plan for the banks to assume their share of the write-offs on ICO loans.

The European Commission (EC) has approved the modification of the current Spanish scheme to support the industrial fabric, especially SMEs, in the wake of the economic crisis caused by the coronavirus. Spain asked Brussels for permission to change this framework on 5 February.

In this way, the Commission considers that the request of Pedro Sánchez’s government is in line with the EU’s temporary framework for state aid. The government will now amend the existing legal framework to promote direct aid to the self-employed and businesses affected by the pandemic.

The government will thus be able to modify the ICO framework to be able to carry out restructuring and write-offs on credits guaranteed by this institute, until now impossible to carry out due to the lack of the necessary tools. In addition, it will implement direct subsidies, tax and payment advantages, refundable advances, guarantees and participative loans, all with the aim of saving small and medium-sized enterprises and the self-employed, the hardest hit by the pandemic, although the measure includes all companies regardless of their size.

It aims to provide liquidity and help restore the solvency of companies that are experiencing a drop in turnover of at least 30% as a result of Covid. However, the aid will be granted before the end of this year.

The government’s idea is to sign an agreement with the banking sector, which channels a large part of this aid, next week through a code of good practice, as was done in 2012, although this formula is not definitive and the text could adopt another formula.

The problem is that the government is urging the banks to reach an agreement as quickly as possible in view of the situation of thousands of micro-SMEs, and is demanding that between 20% and 30% of ICO credits in payment difficulties be covered by the banks through write-offs, a route that the sector opposes.

The banks are in favour of looking for other alternatives beforehand to prevent these write-offs from increasing their default, and that only SMEs with ICO loans benefit. They are looking for time to negotiate with the companies, but Economía considers that the write-offs, approved by Brussels, are one of the quickest solutions to alleviate the payment of a loan for a small company.