Sunday, October 2

European funds impose a new bankruptcy law on the Government

The Spanish government proposed on Tuesday to reform the bankruptcy law to simplify business restructuring plans. In this way, it would fulfill an important condition agreed with Brussels to unlock new tranches of recovery funds from the European Union.

Context: The current bankruptcy law in Spain has been criticized by bodies such as the International Monetary Fund for being slow and convoluted, often leading to bankruptcy.

  • “We do not want any viable company to have to lower the blind due to specific economic difficulties and we do not want any entrepreneur to stop undertaking because of a failed project that will weigh them down forever,” Justice Minister Pilar Llop told the press.

Why does this reform matter? Spanish companies have been among the most active in Europe when requesting lines of credit and liquidity endorsed by the State during the pandemic.

  • Since the first confinement applied in Spain, in March 2020, the obligation to declare insolvent has been suspended. The government extended the moratorium in November until June 2022 to avoid an avalanche of business bankruptcies.
  • The reform of the bankruptcy law is one of the requirements that Madrid must meet to access new tranches of European funds. It is the same as with the labor reform.