The coronavirus crisis has placed entrepreneurs against the wall. Factories at a standstill, businesses and the self-employed bereft of income, an avalanche of temporary lay-off schemes (ERTO), outstanding tax payments and widespread confusion in the country. It is in this context that we interview the Catalan government minister for enterprise and knowledge, Àngels Chacón. A phone interview, connecting Barcelona to Igualada where the minister has been confined for over three weeks. She stresses that, "now there is great concern, uncertainty and anxiety” about the lasting impact this situation will have on the Catalan business fabric once the pandemic is over.
You are in permanent contact with business in all sectors. How do entrepreneurs feel?
There is great concern, uncertainty and anxiety. We are anxious about what is happening and what will happen. But first I want to make clear what our business fabric is like, because when it is mentioned people tend to think of large multinationals. In Catalonia, 94.6% of enterprises have fewer than 10 workers, and almost 99% fewer than 50. From one day to the next the activity of many of these businesses came to a halt.
Which are the worst hit sectors?
The tourism and hospitality industries, already recently hard hit by storm Gloria. Flights are down 88% compared with March 2019. Bookings are 90% down. It is a sector in a critical condition, badly affected by the cancellations for the Easter holidays and part of the summer season... Economic distress is also widespread in the retail sector, whose activity has become impossible overnight. The rest of the companies are also affected, because they have no income but still face financial expenditure such as payments to staff, taxes and so on.
Safeguarding workers' rights should be a priority, but above all we are interested in saving businesses, because otherwise these workers will have nowhere to work in future. There will be no business fabric as we understand it today. Here comes the first of my thoughts: first for the workers, for the price they are paying, because under many of the temporary lay-off schemes (ERTOs) they will not receive anything for some days to come. As for entrepreneurs, we are well aware of everything they are enduring. My question is: Spanish government, what are you enduring, what have you decided to contribute to our productive fabric?
Some renowned economists and institutions, such as the IMF, think that there will be a crisis as bad, or worse, than the 2008 one. Do you agree?
Yes, it will be different because what we lived through then was a crisis of the actual economic model, and it was harder here than in other countries because it was somewhat obscured by speculation in the real estate sector, but the fact is that the productive economy had not been protected in the years prior to the 2008 crisis. Now we are brought to a sudden halt, and this is a catalyst that brings about a change in many of our consumption habits of productive models. We already see how this has increased in certain fields such as digitalisation, teleworking, etc. Two things happened at once: a halt of the economy and a catalyst for change, both at a global level. Not an easy combination at all.
I ask the Spanish government to put itself in the shoes of an employer and to explain how to work the miracle of paying the bills without an income
Are the measures proposed by Pedro Sánchez sufficient for SMEs and the self-employed? He has said several times that the business fabric is in danger of disappearing. What does he mean?
We know the situation is critical and the health of our citizens must be the priority. Nonetheless, given the framework change we are talking about at EU level – where the deficit goals have been made more flexible - I would like the Spanish state to be clear and say how many millions will be made available and how they will be spent. I think you need to inject money, not just give guarantees and benefits to workers. Our business fabric, with its characteristics, is the forgotten element because it cannot withstand all these burdens.
Beyond that, which in the end that is not a direct injection, the state acts as the guarantor. But what direct benefits are there for citizens and for the business sector? As yet we have not seen any, or scarcely any. I ask the Spanish government to put itself in the shoes of an employer with fewer than 10 workers, who has to pay Social Security contributions, mortgages, etc, and to explain how to work the miracle of paying the bills without an income. How do you square this? Cannot be done. What measures are effective? We ask that cash be made available to them, and then that their debts be refinanced. It is necessary to be more demanding and ask that, for these months, employers pay reduced taxes or postpone payment, not to mention the self-employed. Admittedly, there is a moratorium, but perhaps writinfg off payments for three or four months would be necessary. As it is, businesses and the self-employed are being burdened with debts for which they receive no help whatsoever.
The Catalan government has repeatedly asked for a moratorium on the payment of the self-employeds' contributions. Why do you think Pedro Sánchez is so reluctant to do so?
Actually, I don't know. There are 540,000 self-employed workers in Catalonia. Their monthly contribution adds up to approximately €185 million for the Spanish state. Not to waive this payment means that all these people will find themselves in a precarious situation later, because Sanchez's moratorium postpones payment but does not reduce the amount to be paid. Despite having no income these self-employed people have the same expenses, and this, I believe, is not wanting to see the problem
As it is, businesses and the self-employed are being burdened with debts for which they receive no help whatsoever.
A few days ago, president Torra accepted he had made mistakes in his management of the situation and said that was happening in the homes for the elderly had not been properly communicated by the Catalan government. Any self-criticism as regards your department?
I think from the beginning we have defended our productive fabric; we have called for measures and I have always been clear and blunt. I have always said that our productive fabric is the guarantee for wealth and job creation, if we do not take care of it we will be facing what now is a health crisis, but will in turn become an economic one and then a social one, if it is not so already. The priority now must be saving lives, but we must not forget that this is also the time when measures to support businesses must be taken, otherwise in a few months we will be discussing how to save our economy. Unfortunately, since the Catalan government, contrary to its wishes, cannot collect taxes, it would like to have direct access to resources and enforce measures directly. The centralisation implemented by the Spanish government to manage the crisis is far removed from our conception of a 21st century management system based on collaborative networks. We have very clearly identified the global context: we are an export-oriented economy, highly diversified, very innovative and open to the world. We know it well, and we wish we could have more powers and manage it more directly.
Therefore, what can Catalonia do to avoid the closing of companies, beyond trying to exert pressure on the Spanish government?
From the Catalan ministry we are providing aid tailored to each sector. In the trade sector we are providing aid worth €9 million and €13 million, either directly or indirectly. We have adopted more direct aid measures depending on the sector, for instance, the temporary suspension of payment of fees for all the entities linked to the Catalan Tourism Agency. As regards the tourist industry, for example, we had a strategic plan together with a marketing plan and we were already seeing results, but that has now changed, there is nothing left. Therefore, we have to act very quickly because when travelling becomes possible again, we have to promote domestic tourism, inland tourism, and so on. This is just one example, but it is very representative because it shows how we had a defined and agreed-upon strategy that was going very well, had reached an all-time record in revenue, and all that was lost overnight. The sector was desperate.
Later on, we will need to strongly support companies to adapt their technology and their dynamics to this new reality, and to remember, more than ever, that our economy must remain international, innovative, sustainable and open to the world. This shake-up makes us start again very suddenly.
Do we have any good news?
Yes, we have. As regards congresses and business fairs: 85% of them are saved, they have been postponed until after the summer, they have not been definitively cancelled.
Yesterday the unemployment data were released. What do you think about the 5.5% increase in Catalonia?
It was predictable. If businesses cannot work, workers do not have jobs.
More than 80,000 ERTO temporary lay-offs have been implemented in Catalonia leaving more than 600,000 workers temporarily unemployed. Do you agree that the ERTOs are the best tool we have, as has been said by various players?
The ERTOs are a temporary solution that treats the symptoms but not the cause. I think it is good to treat the symptoms, but if we don't focus on the cause we will end up with permanent lay-offs. The question I ask myself is: businesses that have had to implement ERTOs, those that for months have been drained of their capital because they have not had any kind of help, will they later be able to continue paying the salaries of these workers if there is no increase in their income? If you do not have an income you can increase your debt but there is a limit beyond which you cannot go on. Remember I am talking about a type of business that does not like to have to lay-off any workers and has its assets at stake. The symptoms are being treated but not the causes.
Do you think the number of ERTOs will continue to rise so abruptly?
Perhaps they will not continue at this steep rate, but they will rise if we do not support companies.
We don't understand what the Spanish government is banking on to save its economy
How can we guarantee that after the temporary lay-off schemes there will be no permanent job losses?
That is the question. Does anyone think that companies will be able to continue bearing this amount of expenses if they have no income? Will they be able to guarantee jobs if their debt becomes much higher than the income of many months? We look at what has been done in other countries, such as France or Denmark where the commitment to entrepreneurship is clear. We don't understand what the Spanish government is banking on to save its economy.
Is the total lockdown that was set in motion last Sunday economically feasible? There is a certain schizophrenia between total confinement and what can really be done. Does the production chain allow for this?
If we want to supply essential products, the supply chain has to be much longer. There is much ignorance about industrial processes. People think we can go to the supermarket and everything will drop out of the sky... It's not like that. One example: food. The primary sector exists but we must keep in mind the seed products, fertilisers, veterinary treatments, animal feed, slaughterhouses, food colouring, preservatives, packaging, waste management of food products, and so on. The chain is very long, and the longer the lockdown is in force, the longer the value chain becomes and the more elements are needed. It does not mean as much is needed, but at least a minimum will be necessary.
How much longer can the productive fabric withstand lockdown?
I believe that the duration of the lockdown must be set by the healthcare authorities because it is based on health criteria. Obviously, if it were up to economic criteria, it would be different. Precisely because we foresaw that many businesses would be badly affected and would have to start from scratch, the measures I mentioned earlier are necessary; but already now there are many companies affected. No one should think that our message means that the economy should have priority over health, we do not mean this at all. But I do not like having to choose between one or the other because you don’t have to; what one must do is save lives - as we do with the lockdown - and also save companies. That involves other measures, based on reducing their costs and increasing their liquidity.
What is your assessment of temporary paid leave?
It’s also a stopgap. Because businesses pay in advance, but then workers will have to compensate. We're back to the same thing: we still haven't seen what the Spanish state is contributing here. It’s not a solution that helps companies maintain their activity.
And would a guaranteed minimum income be a good solution?
It would be a temporary solution. But if we do not guarantee business continuity, for how long will we have to maintain it? It’s a question of logic: either we invest in the productive fabric or jobs will be gone. Let us not, I repeat, confuse it with big business; that’s the area that is least at risk and it’s the one that has received the Spanish government’s aid. In this area we have seen it act. But let us ask again: Spanish state, to what point are you committed? When we talk about helping the productive economy, it’s not about helping the speculative or exploitative part. We must take into account that we are very different from other places in the Spanish state, where much more concentrated industry dominates, or Madrid, where the financial sector, services, insurances, etcetera, are located. Here instead, we are small enterprises, craftspeople, shopkeepers...
Of course we will get by. There is no option not to.
One of the few beautiful things we have seen these days is the solidarity of both the business community and individuals.
Yes, we must be very grateful for the productive fabric we have, which has often been very underestimated, stigmatised. It shows what our society is like: Catalonia is a country of solidarity, of involvement, and we thought the best way to articulate all this generosity was through the ACCIÓ marketplace because that’s where we have all the international office networks and the cluster policy system. In this way we’ve gathered all the offers of solidarity, already more than 1,300 were received in a week. We put companies in contact with each other so that together they can make an efficient contribution.
There has been controversy over the slowness of the protocols and approvals by the Spanish health ministry to approve these initiatives, as in the case of the SEAT respirators. Are you aware of this?
Yes. We put many of these companies working on projects in touch with one another. Now in Catalonia there are eleven projects to do with respirators, on which many parties work together. Our intervention is limited to putting them in contact with one another. From here, we’d like to have the powers to give these respirators the seal of approval for use, but we do not, and therefore they have to go through the procedure centrally laid down. As regards the slowness, we could ask for greater speed; in regard to the criteria, I don't have the knowledge and I believe that we must be cautious because this is a question of health and responsibility. I would like Catalonia to have a certification agency; it would go faster, most certainly. But the powers are what they are...
Much has been said about the policies being implemented in other countries such as in France where payment for utilities has been deferred, or the social agreement for the temporary lay-off scheme reached in Denmark. Do you think this is being done better abroad?
In terms of defending the productive economy, yes, because some governments have been very clear that if there are no companies, there is neither wealth nor jobs.
But will we get by?
Yes, of course we will. There is no option not to. I do not contemplate it. First, because in Catalonia we are accustomed to overcoming problems, ours is not a resigned attitude, and second, we have the elements to continue being competitive in this new context and adapt to it. I strongly believe in our possibilities.