The key action of the public sector | Economy

The growing role of public finances has been the most characteristic feature of Europe’s responses to recent crises (financial, 2007-2008; Great Recession, 2009-2013 and pandemic, 2020-2021). Public action has been decisive in avoiding a humanitarian catastrophe, although it has not prevented high social costs and worrying indebtedness. In the current crisis caused by the invasion of Ukraine by Putin’s Russia, Europe is once again relying fundamentally on the public sector.

In the Versailles Declaration on March 11, European leaders declared: “We will mobilize the necessary European and national public funding to improve access to risk capital, overcome market failures, mobilize private investment and foster innovative projects.” The ultimate support is public funds: “We will use the budget and potential of the European Investment Bank Group.”

Essentially, the role of the public sector has been decisive in facing the challenges of the pandemic in Europe and Spain. A recent study by Funcas, Focus on Spanish Society, highlights the strong increase in social and health spending in the European Union and in Spain. In the EU, spending on social protection grew remarkably during the Great Recession. In 2020, it rose from 19%-20% to 22% of GDP. The same year, health spending rose one point, to 8% of GDP. In Spain the rise has been more intense because it started from a lower level. Spending on social protection grew in 2020 by 4.7 points, to 22.1% of GDP, and health spending by 1.5 points, to 7.6% of GDP. The increase in total public spending in 2020 was more intense in Spain, where it rose from 42.1% to 52.1% of GDP, while in Europe it went from 46.5% to 53.1%.

The financial crisis required substantial public resources in Europe to repair the debacle caused by reckless banking behavior. Between 2008 and 2016, aid to European banks amounted to 464,000 million euros, including 100,000 million to those of the United Kingdom. Now we know the result of those aids. 237,000 million euros have been definitively lost, of which 24.6% correspond to Spain, the country that bears the largest bill, according to Eurostat. The managers of this crisis in our country have never explained the reason for such a high cost. A lousy management that weighs heavily on taxpayers, not counting the direct victims, such as those affected by preference shares, evicted persons, floor clauses and an endless list of bank abuses.

The reparations of so many crises are not free. Crises pass, but debts remain. In the EU, public debt has gone from 59% of GDP in 2007 to 90% in 2020. In the same period in Spain it has almost tripled from 36% to 120% of GDP. Not all debts are the same. The banks are unjustifiable.

He knows in depth all the sides of the coin.


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