Spain prepares fresh credit for struggling companies and families

Spanish companies and families will be able to get credit more easily, officials announced on Tuesday, with new liquidity lifelines set to come online.

Madrid is releasing another tranche of the 100 billion euros ($109bn) of state-backed credit announced in March.

“If companies and the productive sector need more liquidity, the government will obviously provide the liquidity mechanisms that will keep them alive,” government spokeswoman Maria Jesus Montero said following a cabinet meeting.

Her comments come a day after the governor of the Bank of Spain called for an extension of temporary liquidity measures to support companies in the worst-affected sectors, such as tourism.

So far, the Spanish government has released credit lines worth 84.5 billion euros ($92.39bn), including 20 billion euros ($22bn) released on Tuesday, of which 60 billion euros ($66bn) will go to support self-employed and small and mid-sized companies.

But banks, which are channelling these funds, as well as companies benefitting from the scheme, have been complaining the loans are not granted fast and efficiently enough because of a lengthy authorisation process.

Of the total amount released so far, the state-agency Instituto de Credito Oficial (ICO) has guaranteed loans worth up to 38.6 billion euros ($42.2bn).

When taking into account part of the risk assumed by lenders, the amount of financing through these credit lines is worth 50 billion euros ($55bn).

As part of the scheme, the state is guaranteeing about 80 percent of the amount borrowed by self-employed workers and small and medium-sized companies if they do not pay the money back, and up to 70 percent in the case of larger companies.

The guarantees cover new or renewed lending but not restructured loans.

On Tuesday, Spain recorded fewer than 100 deaths from coronavirus for the third day in a row.

The Health Ministry said 83 people had died during the previous 24 hours, taking the overall death toll to 27,778.

It reported 295 new cases, bringing the total in the outbreak to just more than 232,000.

The government has asked parliament to extend the current state of emergency to June 7, saying it is the only legal instrument that allows authorities to order lockdowns.

Prime Minister Pedro Sanchez had initially said he would seek an extension of approximately a month, but the government reduced the request to two weeks to secure the support of the centre-right Ciudadanos party – thereby guaranteeing it would pass during Wednesday’s vote in the 350-seat parliament where Sanchez’s coalition is in a minority.