The coronavirus crisis convinced the government to change its priorities. The tax incentive to stop the recession has now had another legitimacy
One effect of the coronavirus was to turn the economic debate upside down: priorities and concerns shifted in such a way that certain policies that previously could be lashed out by populists are now seen as sensible and even “market friendly”. That is why there is talk in all countries about the need to put fiscal discipline in the background and move to inject money into the economy without inhibition.
Conversely, if a government were to stick to budgetary and monetary rigidity, it would be seen as one that fosters an economic and social catastrophe with an unmanageable unemployment crisis.
It is happening in the world and, as is becoming evident in the last hours, it is also happening in Argentina: the Government is quickly moving away from its initial positions to adopt a decidedly interventionist tone.
If two or three weeks ago – nothing more – Alberto Fernández had taken similar measures to those he decided in recent days; Or if he had talked about sending the AFIP to “go after” unscrupulous businessmen who are raising prices, the President would most likely have been described as a “Kirchner who does not change anymore.” And taking inconductive initiatives to get the economy out of the well.
But everything changed – and continues to change – with a speed rarely seen. The historical crisis that the world is facing due to the pandemic forces us to take extraordinary measures.
And the proof of this is that the announcements of the last hours in the sense of giving subsidies, soft loans, tax facilities, new reinforcements of social plans, stimuli to consumption and measures to support employment are generating a broad consensus. Quite simply, it is seen as the only feasible way to avoid worsening the state of shock.
The developed world, in crisis mode
There is a new scale of values to which the main world leaders fold. Including Argentina. The situation should not attract attention if it were not for the country living on its own agenda, very distant from that of the rest of the world.
What will happen from now on? What is Alberto F. thinking about? In the dynamics of the crisis, the head of state has been showing that pay attention to what world leaders do to make decisions.
He imitated Donald Trump when, days ago, the American decided to disconnect from Europe, with the exception of the United Kingdom. And he carefully follows the US policy of practically zeroing the interest rate, in a move that recalled the massive injection of dollars that the northern country carried out during the 2008 financial crisis.
On Tuesday, in radio statements, he gave the German chancellor as an example. “You do this and the fiscal issue is complicated, but this time the most important thing is to sustain the economy. Even Merkel said it: when there is an emergency and you are in intensive therapy in economic matters, what you need is more time”Fernández said.
The President warned – and perhaps the first step in this regard was seen – that he will not object when addressing social needs in the midst of the coronavirus crisis.
The same Alberto F. who a few weeks ago started his government with one eye on fiscal accounts, and the other on inflation and growth, now falls below the first objective.
The President understands that this is what the other countries are doing, starting with the most developed ones.
Spain has just announced a package of countercyclical measures for the equivalent of 20% of GDP (€ 200 billion)! It surpassed that launched in France and the United Kingdom, for the equivalent of 12 points of Gross Product.
Merkel’s government was bold: it promised “unlimited” liquidity to companies, provided there are no bankruptcies.
Far behind comes Brazil, with “just” 2% of GDP, with a Bolsonaro who refuses to value the pandemic as a terrifying fact for public health and the economy.
In this context, one understands the flexibility that Casa Rosada began to show, despite Argentina’s fiscal weakness.
The crisis that world leaders are seeing is so great that the Monetary Fund itself – which is par excellence a beacon of monetary and fiscal orthodoxy – has just sentenced that the time has come to be more flexible.
In an article signed by Kristalina Georgieva, head of the IMF, last Monday on the body’s blog, entitled “Political Action for a Healthy Global Economy,” the economist was in favor of such fiscal and monetary flexibility.
“An additional fiscal stimulus will be necessary to avoid lasting economic damage. There is much more work to be done,” Georgieva said..
At today’s values, the Bulgarian calculated that the G20 contributed a whopping US $ 900,000 million during the crisis of 2008-2009. In this sense, it made available US $ 50,000 million from the IMF to emerging countries, such as Argentina.
Alberto F., who has so far played his own game in a complicated debt restructuring with the Fund and with private bondholders, has yet to give any indication if it would be comfortable for him to get in line to be served by the IMF.
So far, the main concern of the Casa Rosada – in this redefinition of priorities – has returned to unemployment. And also at that point it has material to be inspired by Europe: with France and Germany at the helm, they put the focus on the State being the main support of the positions at risk.
With much less robust fiscal slack, the government promises active policies so that economic activity does not collapse and the unemployment rate skyrockets.
To get an idea of what was done in past crises: during the fall of 2009, the Repro (subsidies to pay part of the salary) reached 145,000 dependent employees, the equivalent of one percentage point of unemployment at that time.
Hard Kirchnerism already redefines agenda
Given the rapid dynamics of the pandemic crisis, it is very likely that the measures announced on Tuesday afternoon will fall short to address the crisis. And that, as the ministers in charge of the novelties themselves warned, additional impulses will be needed later.
While Alberto continues his turn from his initial moderate stance towards a hardening of the speech and a “populist” tonic in the program, “hard” Kirchnerism has already shown that it has its own agenda.
Former Vice President Amado Boudou was commissioned to put that battery of measures on the table. “Public service companies would have to be nationalized,” said the former official, who is now serving a prison sentence.
“There is a discussion of whether public services companies should be nationalized or nationalized. It is not enough to nationalize them,” he said.
“Public service companies have become the great value extractors of society. They do not invest, they are neither innovative nor risky, they are companies that neoliberalism has privatized and in things that belong to everyone,” added Boudou from prison. in dialogue with a radio.
In the same sense, some leaders of the toughest Kirchnerism have been demanding that the Government postpone the renegotiation of the debt to use the resources in favor of the internal market, in a context of global crisis due to the pandemic.
“Who is going to realize that Argentina fell into default in the midst of such a mess? Let’s use the reserves of the Central Bank to face the crisis. There will be time to sit down and negotiate the debt,” say some of the media spokesmen. of Kirchnerism.
Quite a sign that the change in the terms of the debate is just beginning to be seen and has not reached its deepest.
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