The Polish government announces an “anti-crisis shield” of 22 billion euro of cash for companies.
The program accounting for 4.5% of Poland's GDP was presented today by Prime Minister Mateusz Morawiecki and the President of the National Bank of Poland Adam Glapiński.
We are living an unprecedented crisis where all of the global economies were suddenly freeze, supply chains are blocked, and economic security has become as crucial as health for many. Now governments across the world are announcing critical financial maneuvers to stop the economic bleeding.
With Europe becoming the epicenter of the pandemic and the United States in a national emergency, governments are putting their foot on the gas to try to limit the devastating economic impact of the spread of the coronavirus by families, workers, and businesses, having the most affected sectors, such as airlines, hotels, and restaurants. Many workers are losing their jobs, and stock markets are still in free fall.
As it is not known how long the pandemic can spread, it is difficult for authorities to calculate how much money they can inject into economies and what emergency measures can be taken to mitigate the most immediate effects on people’s income.
What will happen to the unemployed, self-employed, informal, and small businesses?
How will families pay rent and the supermarket?
And what will happen to the multinational giants that move international production chains and that have now started to paralyze their factories?
The Polish “anti-crisis Shield.”
Poland’s government has announced the mobilization of almost 100 billion zlotych (around 22 billion euro) to combat the economic effects of the pandemic. The State will open a line of guarantees available to the most affected companies.
But what exactly can entrepreneurs count on? They will have access to unlimited interest-free loans, spread over three years, and the first repayment installment is to be made only in the second year.
The program is to be managed by the Polish Development Fund. The money is to be found, for example, from the issue of bonds. The share of the National Bank of Poland ( NBP) will sell them too, which has already started buying their shares on the secondary market a few weeks ago.
The “financial shield” program for companies is to consume at least PLN 100 billion. Around 50% of this amount will go to small and medium-sized enterprises, and PLN 25 billion will be allocated to help micro and large companies. The maximum support entrepreneurs can count on also varies depending on the size of the company, and the limit for state aid for micro-enterprises is 324,000 — zł.(296.000 euro).
The subsidy can be used only to cover the costs of business operations, in particular employee remuneration, and 25% for early repayment of loans.
According to the Prime Minister’s declaration, small and medium-sized enterprises will be able to get PLN 3.5 million.
In a maximum of 75% of the financial subsidies for small and medium enterprises will be non-returnable, including 25% that will be dedicated to business operation continuity, 25% depending on the loss on sales incurred by the company, and an additional 25% depending on maintaining average employment over 12 months.
The return of the subsidy by the entrepreneur will be proportionally higher in the event of a decrease in employment. The maximum value of the program for SMEs is PLN 50 billion (11 billion euro), of which the assumed amount of non-returnable funds may amount to PLN 32 billion (7 billion euros).
The largest companies, i.e., those employing more than 250 people, will be able to obtain PLN 25 billion in three different types of support:
- Liquidity financing in the form of loans or bonds for a period of two years worth up to PLN 1 billion.
- Preferential financing in the form of preferential loans for a period of three years partly non-returnable and dependent on a financial loss and maintaining employment worth up to PLN 750 million per entity.
- Investment financing in the form of acquired equity instruments (shares or stocks) on an arm’s length basis or as part of public aid for up to PLN 1 billion per entity.
Preferential loans will be worth up to PLN 750 million. Also, the State will be able to acquire shares in these companies, but not more than PLN 1 billion per company.
Prime Minister Morawiecki declared that thanks to the new “anti-crisis shield,” it will be possible to save from two to five million jobs.
Helping with conditions.
Companies whose turnover as a result of a pandemic decreased by approximately 25 percent will be able to apply for it. The primary condition will be maintaining business running and not firing employees.
Applications for help should be as simple as possible. Similarly to how it works even in Germany — a company statement is enough to obtain it. Then the state authorities are to verify them. Statements will be made online.
Companies in Poland will be able to use all the instruments that the government offers in aid packages, including companies that have already dismissed employees have a chance to join the program.
The spectre of millions of job losses.
Recently, the International Labor Organization (ILO) warned that the pandemic could end up with up to 24.7 million jobs worldwide, exceeding the effects of the 2008 financial crisis, which triggered the elimination of 22 million work stations.
“It is no longer just a global health crisis, it is a serious economic and labor crisis that is having a strong impact on people,” said Guy Ryder, ILO director-general.
The most responsive governments are playing most of their cards to supply oxygen to the economy, pursuing a coordinated and timely fiscal action aiming to increase consumer and market confidence.
But facing this crisis is not just an economic effort; it is mainly a public health operation, such as the development of vaccines and international tests to control the pandemic.
European leaders seem to be slowly getting ready to invest to save economies from a major catastrophe, having as the primary goal don’t let insolvent companies go bankrupt and fire employees.
Loan guarantee programs are a good start, but the big question is, what is the limit?. How much will fiscal budgets resist if the pandemic does not subside in the coming weeks and last for months?
I believe we are all anxious to find out the answer.