The new general confinement, which will kick off Thursday, will act as a push for bankruptcy and job destruction. “There is a qualitative issue and a quantitative one. That is a push in that direction, without a doubt. The question is the magnitude of the push ”, warns Pedro Brinca, economist and professor at the Nova School of Business and Economics (NOVA SBE), in statements to Renaissance.
For the economist, Portugal, for a political option, in measures to support companies, “bet on a model much more centered on default, on credit lines. Basically, a set of measures that provide liquidity to companies, but that turn into debt. ”
Germany, for its part, has adopted a different strategy which, in the long run, can safeguard some companies from financial asphyxiation.
“He invested much more in direct aid to companies, which became permitted because all questions of State aid, which were prohibited by the Treaty of Rome, were suspended with the pandemic issue. It is enough to see that Portugal spent 2.5% of GDP on direct aid, while Germany spent 8.3% ”, he notes. (The data are from the European Bruegel Institute, referring to November 2020 and expressed as a percentage of GDP in 2019.)
According to Pedro Brinca, the strategy adopted by the Government should not be read as ideological, but as a result of the country’s recent history.
“We are a little traumatized by the issue of public debt and the consolidation of budget accounts”.
In any case, he defends: “Never in Portugal’s history has it made so much sense to borrow to support the economy. We are borrowing at zero rate, basically. This is not believed to change much because there is a strong and institutional commitment by the European institutions to support the debts of the states. The ECB [Banco Central Europeu] continues to make purchases of sovereign debt. I don’t think that will slow down anytime soon. ”
The economist’s idea and opinion is supported by those on the ground. Jorge Pisco, president of the Portuguese Confederation of Micro, Small and Medium Enterprises (CPPME), recalls: “What CPPME has always come to defend over these months is that it was necessary to create a non-repayable treasury fund for companies , so that companies could face this situation. And at this point, what has happened is that this treasury fund has not reached the companies, the companies are decapitalized and we are in a terrible situation where we are going to enter a period of confinement again. ”
João Vieira Lopes, president of the Confederation of Commerce and Services of Portugal (CCP), also defends a similar position.
“Portugal is one of the countries that invested less in percentage and this taboo has to be broken. In other words, Portugal cannot be under any illusions that it can handle the deficit this year and that is why the need for funds that are completely placed on companies or consumers, also, say, are essential to avoid an almost uncontrolled rise in unemployment ”, says The Renaissance.
The slow asphyxiation of companies
The Portuguese business support strategy may, eventually, precipitate the closure of some. This will have an impact on the economy.
“The speed of recovery, once the pandemic is overcome, will be as much or greater when the job destruction is less,” warns economist Pedro Brinca.
Last Friday, the Minister of Economy, Pedro Siza Vieira, assured that companies that have to close due to the new confinement will be able to immediately access the simplified lay-off regime – in the same way as applied last spring , except in one important detail: workers ‘wages will be paid at 100%, as provided for in the State Budget for 2021. In other words, companies will pay 19% of workers’ wages, while the remaining amount will be insured by Social Security.
The minister also said that the amount of support to be attributed to companies under the Apoiar program will be increased, but did not specify the amount. “What we intend to do is to reinforce all the support in force to withstand the responsiveness of our companies”, he said.
Remember: the Support program it consists of non-repayable subsidies to companies in the sectors of commerce, restaurants, cultural activities and accommodation, which had a turnover drop of more than 25% in the first nine months of 2020.
By offering support based on additional indebtedness, the Government is taking “value from companies”, explains Pedro Brinca.
Therefore, he expresses a fear: “My fear is excessive indebtedness due to the pandemic, an accumulation of tax, bank charges. If workers are in ‘lay-off’, even companies have to pay a third [do salário dos trabalhadores], these being at home stopped doing nothing. In this sense, we are talking about accumulating losses, accumulating losses and putting companies in a more complicated situation, where the value of companies is getting smaller and smaller. We can even reach a point where the owners of the companies say: ‘it is so indebted, it is so in the red, that it is better to close this one, go bankrupt and open a new one’. We can get to this point. ”
Delays and more delays
For now, the measures to support companies already announced by Siza Vieira are not enough to allay the concerns of Jorge Pisco, president CPPME, on the eve of a new confinement.
AT Renaissance, reveals that the catering sector, hairdressers and marketers, in particular, have “very negative” expectations. “These are sectors that are currently in a dramatic expectation of what will happen tomorrow”, he says.
Jorge Pisco complains that the measures announced by the executive of António Costa in December, when the State Budget for 2021 was approved, “have not yet reached companies and are late in arriving”.
“These measures have not yet been implemented, despite the fact that the Government, last Friday, announced that new measures were planned to be able to respond to this period of confinement. The reality is that more measures are being announced without the previous ones being implemented and what we need at the moment is that the measures that are approved in the State Budget reach the companies quickly ”, he shoots.
A survey carried out by CCP with its associates, in December last year, concluded that one in five national companies was in danger of closing doors in 2021. This worrying record will now tend to increase according to the duration of the new confinement .
“The Government advanced in December with a package [de medidas] that we consider positive. However, some of these measures, such as income support, are still not even regulated ”, points out João Vieira Lopes, president of CCP.
And the prognosis he makes – even with increased support – is not positive: many of the companies that will survive the pandemic “will have to adjust their staff to adjust them to the volume of business”, he warns.
*The article has been translated based on the content of Renascença – Noticias by rr.sapo.pt. If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!
*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.
*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!