Newsletter: State guarantee programs helping businesses through Covid and the Ukraine crisis
Tuesday, 14 June 2022
Hello Future is blue readers,
Today we are covering how State guarantee programs have played a key role to support businesses during Covid and what are the broader implications of these programs for our economies.
We've invited Alice Faibishenko to our latest podcast hosted by Carlos Carnicero Urabayen to get a clear understanding of how public loan guarantees have preserved access to bank loans for businesses and what are the risks as we see now maturities coming to an end.
Our guest, Alice Faibishenko, is a Senior Advisor at Funcas think tank and a founding partner of the E3 Partnership, a firm focused on market intelligence and advisory services. She is also a former senior advisor of the Minister of Economy in Spain.
In addition, you can read below about the newest edition of the Funcas SEFO report and also, as usual, you will find what we´ve been reading over the last few days.
New podcast available!
Most euro area governments launched large programmes of public loan guarantees to preserve access to bank loans for businesses. Demand from firms for credit soared remarkably since March 2020 as firms scrambled to bridge liquidity gaps originating from the Covid shock.
Don´t miss our new podcast episode featuring Alice Faibishenko where we discuss questions such as: Why Spain´s Public Guarantee Scheme contemplates guaranteed lending, when other countries such as the US and Germany opted for direct aid for companies or whether the Spanish programme has been helpful in containing the evolution on Non Performing Loans in Spain?
State guarantees and latent non-performance
Extension of outstanding state guaranteed loans will come as a lifeline for the sectors and businesses most affected by the Covid and Ukraine crisis. In the case of the banks, it will contain the materialisation of associated non-performance. Nonetheless, the increase in riskier stages of public guarantee scheme (PGS) exposures could translate into growth in non-performance in the business loan segment, with the potential impact substantially higher in Spain than in Europe due to the higher weight of PGS exposures in total outstanding business loans. You can read more about this topic in the latest Funcas´ SEFO report.
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What we are reading
Why ending energy imports from Russia remains essential
Sanctions make it hard for Moscow to spend its export earnings — but reducing them still matters, claims FT´s Martin Sandbu.
Policies to support the self-employed in the labour markets of the future
Good overview of the need to update worker classification exploring the rationale and options for extending protection against discrimination and harassment, and the right to collective action, to more workers, also discussing the special case of platform work.
Here are 5 reasons why wages aren't rising as quickly as the cost of living.
In less than 2 minutes, this WEF video presents some key points on why the high levels of inflation we are seeing in both sides of the Atlantic is not triggering an equivalent rise in salaries.
What can we know about the cost of Brexit so far?
Disentangling the economic effects of Brexit and Covid-19 is difficult. But now that most advanced economies have surpassed their pre-pandemic level of output, there is a basis of comparison for the UK economy.
Have a nice rest of the week.
Raymond Torres
Funcas Europe Director