Covid-19 Declaration of the State of Alarm 14/03/2020



For many weeks we have all been observing the outbreak of this disease with a kind of detached fascination – but reality has finally struck home in Spain.

With effect from 14 March, the Government declared a ‘State of Alarm’ using legislation that dates back to 1981. This allows the Administration extraordinary powers for the maximum of 15 days. Any extension of this period, which  seems more than likely, will require the approval of Congress.

Spain has closed all non-food/pharmaceutical retail activity as well as bars and restaurants. Banks and other financial outlets remain open. The tourism sector has ground to a total halt and hotels are closing for the duration of the crisis.

Individuals are forbidden all but essential movement but are permitted to travel to work, shop for food or medicines, refuel vehicles and take care of the disabled. Otherwise they must stay at home. All events of whatever nature have been cancelled throughout the country. Easter celebrations are being cancelled. All ski resorts have closed.

Some areas of Spain that have become coronavirus hotspots and are now in complete isolation, banning all movement in and out of the immediate area.

Videos are already circulating of angry police haranguing individuals who had  the temerity to venture outside for a bit of exercise or to get some fresh air on the beach. It seems that it does not take long for some officials to revert to type!

Economic consequences

Many businesses will continue to function, as the Government has decided that people may travel to work and this includes employees and the self employed who have to travel as part of their work.

Where practical, staff are being encouraged to work from home, especially if they have to care for their children. Our firm started home working today for 80% of the staff with the office remaining open with a few staff who live locally. For us at least, it is business as normal but we will see what happens if the ‘State of Alarm’ lasts longer than a few weeks.

Many businesses have already decided to close down, even if not required to do so, invoking a kind of Christmas holidays feel to the place. Easter is only 3 weeks away.

It is clear that as a direct result of the curtailment of economic activities in so many sectors, many businesses will suffer damage to their cash inflows.

Government measures to help businesses

So far the Government has given very few concessions to businesses to help them through the crisis.

Here is what has been announced so far (16 March):

  1. Payment of IVA, IRPF (employee etc withholding taxes), corporation tax, can be delayed up to 6 months with the first 3 months being interest free. No guarantees need to be provided up to 30.000 €.
  2. Deadlines to respond to tax demands, enquiries and other procedural tax matters that fall due between 16 and 30 March are automatically extended for the duration of the State of Alarm (until 30 March or any subsequent extensions).

The Spanish press has reported that the Government coalition partners, the PSOE and Podemos parties, cannot agree on the measures that should be provided to businesses. Having a coalition Government in Spain that is in conflict and cannot decide on how to help businesses at this uniquely critical moment is extremely dangerous. We hope that this will resolve itself quickly.

Especially valuable would be emergency measures that would allow employers to take steps to manage their payroll and social security costs. These are the largest fixed costs for most businesses.

  1. Allowing employers to suspend employment or reduce working hours would seem to be absolutely essential. A mechanism already exists in labour regulations this being an ERTE (Expediente de regulación de empleo temporal), a procedure allowing the temporary modification of employment contracts.  
  2. It would be especially easy to allow employers to defer payment of monthly social security contributions, which amount to around 36% of payroll costs.

Another obvious step would be to enable businesses to have immediate access to the Government guaranteed business financing scheme known as ICO loans. Under these arrangements, high street banks are able to provide loans with the minimum of formalities and guarantees.

Government measures to help the self employed and individuals who lose employment

We are also hoping that help will be provided to the self employed who are unable to work due to the economic and health effects of the coronavirus and those who cannot work because they have to care for children at home. We will know more on 17 March.

Practical self-help measures

Businesses need to take steps to survive and make the best of the solutions provided by the Government, whether these are truly useful or barely adequate.

We are at the disposal of all our clients to provide practical advice, or indeed just to act as a confidential sounding board to allow our clients to explore their options.

Our firm has been through two serious recessions since it was established in 1985 and we certainly have the experience to help.

Updates

The next days and weeks will be fast moving and new positive measures will hopefully emerge.

We will be updating our website each day with news so check back regularly. We are expecting tomorrow, 17 March, an announcement from Government of the help that will be provided to businesses. As soon as we have details of this we will circulate the details and we very much hope we will be able to circulate details of important labour measures that will help businesses.