MADRID – The corona crisis hit companies harder than households in Spain. Since the start of the pandemic, the Bank of Spain concluded there is high corporate debt as companies have had to borrow en masse while families went into ‘savings mode’.
It now seems clear that not everyone in Spain has been hit equally hard by the pandemic. The Spanish bank recently confirmed this statement. Spanish newspaper El Mundo wrote on Monday evening referring to a report from the Bank of Spain comparing the impact of the corona crisis on banks and families.
Different impact crisis for companies and households
Although this does not apply to all companies and households, the vast majority of companies in Spain have gone into debt to avoid bankruptcy. Meanwhile households have improved their economic situation through financial support from the government that many families have taken advantage of.
Skyrocketing debt for Spanish companies
The Spanish bank says many companies in Spain have survived a year of the corona crisis, but not without building up sky high corporate debt. To make up for the shortfall in income, many companies were forced to take out loans. In the past year, the debt burden of Spanish companies rose by an average of 6.25%. That is the highest percentage increase since 2008. Furthermore, that is the year the financial crisis started, after which the credit bubble that had arisen, ended.
Families in Spain in ‘saving mode’
While companies went into debt, households in Spain ended up in a ‘savings mode’. Also some have built up a buffer much faster for the period ahead. Financial support in the form of an ERTE scheme or help for the self-employed in Spain has also ensured that workers in the worst affected sectors have been able to partially maintain their income.
Therefore, families have saved extra, according to figures from the Spanish bank. Household savings in Spain rose by 8% last year to a record €979billion. In total, household savings have increased by almost €24.5billion. Many Spanish families have even been able to continue their mortgage repayment plan since the housing bubble burst in 2009.
This is the conclusion after one year of the corona pandemic. However, the Bank of Spain says the crisis, for both companies and families, is not yet over. Moreover, only after the end of financial support will it become clear how well both target groups will emerge from the crisis.