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10 April 2020

Pablo Iglesias on Spain’s plan to introduce a basic income to fight the economic crisis

The Podemos leader and Spanish deputy prime minister outlines the government's radical proposal to support living standards. 

By Paul Mason

With Spain suffering one of the worst coronavirus outbreaks in the developed world (152,446 cases and 15,238 deaths at time of writing), its socialist/radical left coalition government has been at the forefront of calls within the eurozone for greater fiscal support. The administration is also reportedly bringing forward an innovative and unique plan for a “basic income” scheme, which Podemos, the left-wing coalition partner, wants to make a permanent part of the Spanish welfare state. I spoke to Pablo Iglesias, the party’s general secretary, and Spain’s deputy prime minister and minister for social rights, about how the basic income scheme might work. 

What is the proposal on providing a universal basic income – what will be the monthly amount and how will it be paid for?

“We are currently working – together with the Ministry of Inclusion and Social Security and the Ministry of Labour – to launch a basic income for those households that, as a consequence of the crisis, have run out of income and are not entitled to unemployment benefits. It is not for all households, only for those without income. 

“Our proposal is to give an allowance of around 500 euros a month to an adult who lives alone, which would reach up to 1,000 euros per month in the case of a home with two adults and two children.

“Inevitably, the Spanish government will have to issue debt in the coming months to pay for this. This is not a problem in this context, since the ECB [European Central Bank] has already said that it will buy this debt to guarantee the stability of sovereign bonds in the financial markets. And by guaranteeing this basic income for households that lose their earnings, we will facilitate the recovery and, with that, the return to economic growth. The best way to reduce debt is to restore growth as soon as possible.”

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There are reports that you consider it to be a permanent solution – what is the rationale for that?

“Indeed, we think that this basic income should remain once we overcome the current crisis. We do not propose the implementation of a universal basic income, but rather a guaranteed income scheme that supplements the income of poor households.

“This has been done for years in some Spanish territories, such as the Basque Country, and with good results. What is necessary now is to extend these guaranteed income schemes to the whole country, with the aim of lifting out of poverty the more than nine million Spaniards who live below that threshold. 

“Permanently adopting this type of measure would not only help to have a fairer and more equitable distribution of income. It would also allow for a more efficient functioning of our economy, ensuring sufficient levels of internal demand.

“Once the crisis is over this measure does not have to be financed with increases in public debt. Spain has an income-to-GDP ratio 7 points lower than the eurozone average. We can reduce part of this difference with a well-designed wealth tax.”

Can more radical fiscal measures to support the population actually change the course of the epidemic, which has hit Spain hard?

“More ambitious fiscal measures – for example, new household support – will help the economic recovery take place earlier and more intensively. Without ambitious fiscal stimulus, the current crisis will not have a U shape, but an L shape.

“In addition, direct transfers can also help reduce the spread of the epidemic itself, since they will provide income for the most vulnerable households, preventing these people from having to leave their homes in the coming weeks.”

What happens if the eurozone vetoes further fiscal stimulus?

“The eurozone is currently not in a position to veto new fiscal stimulus. Governments have room to implement greater stimulus than are being implemented. The ECB has reiterated its willingness to escort these new fiscal measures. We must be aware of it.

“Undoubtedly, it would be desirable for EU governments to jointly issue ‘eurobonds for reconstruction’. But if this possibility does not occur, we must not ignore that we continue to have in our hands the possibility of promoting ambitious fiscal stimulus at the national level.”

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