Spain submits spending plans to EU stimulus fund

Spain has sent its landmark plan to Brussels to spend 140 billion euros from the EU’s coronavirus recovery fund as Pedro Sánchez’s government seeks to respond to criticism that it has centralized control over the money and that the immediate economic impact may be less than expected.

The socialist prime minister maintains that the plan, officially submitted for EU approval on Friday, will transform the country’s economy in the same way as Spain’s entry into the European Community in 1986.

In addition to the 70 billion euros in grants that Madrid plans to exploit between 2021 and 2023, the government intends to contract an equivalent amount of loans from 2024 to 2026. It has also proposed more than 100 accompanying reforms.

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EU countries including Portugal, Germany and Greece have already submitted their plans, but others are expected to miss Friday’s deadline, after which the European Commission will have two months to assess the projects before the Member States’ decision to release funds.

Spain, which has suffered greatly from the pandemic in human and economic terms, is one of the countries that will receive the most from the € 750 billion stimulus fund, officially known as the New generation EU.

Political rivals and some business figures have accused Mr Sánchez’s government of lacking transparency on how it will allocate the money, while economists – some at the Bank of Spain – fear that the resources are not generating as much growth as the government expects.

The government has already downgraded its growth forecast for this year from 9.8% to 6.5%, in part because some EU funds are expected to be spent later than expected.

This week, the opposition-led administration of Andalusia complained that it had had no word from the central government since January about the fund – from which the southern region hopes to receive € 35 billion.

But, in an interview with the Financial Times, Reyes Maroto, Spain’s Minister of Industry and Tourism, said the planning process is open and responds to demands from sectors.

“We have been as transparent as a government can be, setting spending in the budget,” she said. “There has been a dialogue with all the players to design the vision we want for Spain.”

She added: “In the case of industry, we have received more than 700 projects, with a total value of 30 billion euros, but I have [just] € 4 billion to be invested over three years. . . The tourism sector asked me for 5.2 billion euros to develop its strategic project; I have 3.4 billion euros. “

Maroto said EU funds would help € 10 billion of planned investment in a planned hub for electric cars, and that the country was also looking to boost its pharmaceutical sector, in line with plans to increase the self-sufficiency and the manufacturing sector’s share of GDP, which has so far declined. this century from 16 to 11 percent.

Spain is currently seeking an agreement with the Commission on the amount of State aid allowed for a battery factory intended to supply car manufacturers such as Seat – a problem that Maroto said needed to be resolved quickly.

She argued that, as Spain borrowed € 27 billion before funds, it was at an advantage over countries that have to wait for the commission to approve their recovery plans before disbursing funds.

“Since we defined it in the budget, we can now do it already,” she said. “We know the money is going to come.” The government has, for example, already authorized the disbursement of 731 million euros in advance to help care for the elderly and modernize social services.

But Maroto said details in many areas have yet to be completed. “We defined the structure in the plan; now we have to disembark the [specific] projects, ”she said.

The government has been criticized for its lack of clarity on the plan’s three most sensitive reforms – affecting pensions, the labor market and the country’s fiscal balance.

He says he hopes this year to reach an agreement with unions and businesses on labor reform and an initial agreement on pensions – but that at present, economic growth and job creation take priority over tax reform.

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