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Moratorium on mortgages and Social Security contributions agreed
Moratorium on mortgages and Social Security contributions agreed
By thinkSPAIN Team Wed, Mar 18, 2020
TRADERS, the self-employed and small businesses forced to shut down due to Spain's being in a State of Alarm over the Covid-19 transmission risk will not have to pay their monthly Social Security, or National Insurance quota, the national government has announced.
With around 75% of Spain's companies being small or medium-sized businesses, many family-run, and over three million of its workforce being self-employed, the lockdown means no income whatsoever – so a petition on Change.org calling for their monthly Social Security standing order to be waived until normality returns very swiftly attracted hundreds of thousands of signatures.
President Pedro Sánchez, during the first-ever Parliamentary meeting via video-conference in Spain's history, has announced measures to help soften the effects including an immediate waiver of Social Security payments for traders who have to shut up shop or whose income is dramatically reduced due to their business being affected, as well as allowing firms to lay staff off straight away and without the usual paperwork and procedures.
These lay-offs are being permitted so firms do not have to make staff redundant as a result of diminishing income.
Some have opted to give their employees annual leave during the crisis, although not all of them can afford for this to be in addition to their usual four weeks a year.
Anyone who is laid off can sign on the dole straight away and continue to claim until their firm reopens and they can go back to work.
Normally, job loss – permanent or temporary – means the employee is able to claim a month's dole money for every four months worked, up to a maximum of two years, after which they need to start 'building it up' again.
As dole money is finite and contribution-based, and as it comes in at 70% of gross salary for the first six months and 50% thereafter, the system has worked well – except during the financial crisis – since it meant not having to rush to take on the first job available, however unsuitable, simply in order to survive, and nobody would be tempted to 'avoid' getting a job and 'living off the State', although in practice, as Spain is a collectivist rather than an individualist culture – shown in scientific cross-cultural experiments on conformity over the years – this would be unlikely to be widespread in any case.
The problem comes for those who have not worked long enough to 'save up' enough dole money, perhaps if they have been out of a job in the recent past and have used up all or most of their allowance.
Additionally, dole money takes up to a month to be paid out.
But with the State of Alarm, anyone laid off temporarily can sign on straight away, whether or not they have paid enough 'into the system' to qualify, and will continue to receive their dole money until their firms restart.
And their dole payments received will not be counted against their existing allowance, so will not deplete it.
Self-employed persons, including business-owners themselves, are also allowed to claim in the same way.
Workers, self-employed or employed, who are forced to stay at home to care for their children now schools are shut nationwide, preventing them from going to work, can claim funds from the State to compensate.
This will come out of the Social Security pot which pays for dole money, maternity and paternity leave, retirement pensions, mostly healthcare – although income tax also does, in this case – widows', widowers', orphans' and sick pensions.
In total, the government plans to put aside a record €200 billion, or 2% of the GDP, to prevent business-owners, employees, and the self-employed from financial ruin.
These generous emergency measures mean companies will be able to shut up shop, employees stay at home, and parents take time off work to look after their children, without any of those affected needing to worry about where the next cent is coming from.
To help them out further, Pedro Sánchez has agreed that anyone affected by the shutdown or by the actual Covid-19 virus – as a carer or patient – will get a stay of grace on their mortgages.
Anyone who cannot pay their mortgage as a result of the crisis will not have to, and this will not count as 'defaulting' or 'non-payment'.
In any case, the mortgage moratorium is in addition to a new law passed over a year ago which states that a homeowner cannot be evicted from his or her primary residence until he or she is in arrears by at least a year's worth of payments, or 20% of the debt, whichever is the largest.
Utility companies – including mobile phone and internet providers – are not allowed to cut off anyone's supply due to non-payment for as long as the Covid-19 lockdown lasts.
In practice, anyone who is considered as 'financially or socially vulnerable', or who is under the social services, cannot have their water or electricity cut off for not paying their bills, and suppliers of both are required to send several warnings and offer assistance before doing so.
Phone and internet connections are now included during the State of Alarm, because this is the only way people can contact each other, as meeting socially is banned – including visiting people at their homes or inviting people round, and even family visits unless it is to care for friends or relatives who are elderly, sick or otherwise dependent.
Sánchez's socialist government's coalition partners, left-wing Podemos, is pushing for the mortgage moratorium to extend to tenants, but this is more complicated and cannot be agreed at the stroke of a pen: Authorities are conscious that some landlords live mostly or even entirely off rental income, and that for many, it is the rent that pays the mortgage on their properties.
However, so far, Sánchez has urged landlords to be as flexible and understanding as possible if their tenants cannot pay because of the Covid-19 situation.
Also, landlords who need the rent paid to cover the mortgage on their property – whether it is a second or subsequent property or a primary residence they are not currently living in – may be able to take advantage of the mortgage moratorium where their tenants cannot pay.
As well as the financial measures, national health authorities have been instructed to offer immediate testing for Covid-19 within the home for anyone who displays symptoms.
The State funding to keep traders and workers afloat and to allow parents to stop or reduce work to look after their children will benefit the public coffers in the long run – it will prevent a recession or financial crisis, which would set the country back years.
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