HEALTHPLAN MAGAZINE

In a significant development, the European Commission has granted Spain's request for an additional €93.5 billion in recovery and resilience funds, significantly elevating the country's total financial package to an impressive €163 billion. Acting Prime Minister Pedro Sanchez celebrated this funding as a vital catalyst for Spain's green and digital transformations, signaling a new era in the nation's economic rejuvenation and modernisation.

Spain's plea for these extra funds found resounding approval, underscoring the importance of fortifying the country's economic recovery efforts. Approximately half of this substantial funding will be provided as loans, emphasising responsible financial stewardship. The remainder will be designated as grants, further bolstering crucial initiatives.

Initially, Spain had sought alterations to the original recovery plan, including the inclusion of an additional €83 billion in loans to facilitate the implementation of 59 new or expanded measures. Notably, the European Commission has earmarked 40% of these funds for climate objectives, reinforcing Spain's commitment to sustainability. This allocation will be instrumental in enhancing the sustainability of Spain's agriculture, combating desertification, and advancing the circular economy.

One notable outcome of this approval is the removal of a contentious measure from a 2021 proposal, which had proposed installing toll booths on highways throughout Spain. Instead, Spain will focus on reducing carbon emissions by promoting greater utilisation of trains for both passengers and merchandise. This shift aligns with broader environmental goals and represents a strategic move to reduce the nation's carbon footprint.

The European Council is now tasked with endorsing the commission's assessment, marking a pivotal step in unlocking the gradual release of these funds. However, Spain's access to the full amount hinges on meeting the defined milestones outlined in its comprehensive plan.

Despite these positive developments, Spain's acting left-wing government has raised concerns about the compliance of certain cities that have received grants but are wavering on their climate commitments. These cities, which transitioned to conservative governance following recent local elections, have made changes such as painting over funded bike lanes or announcing delays and cutbacks in low-emission traffic zones.

Concurrently, Spain's national government faces a degree of political instability following summer elections that resulted in a hung parliament. In the wake of the conservative candidate's failed bid for prime minister, Pedro Sanchez's Socialist Party is actively negotiating with left-wing allies and separatist groups to secure the necessary parliamentary majority. Failure to attain sufficient support could potentially lead to new elections in the coming months.

This significant influx of funds is part of an ongoing commitment to bolster Spain's recovery efforts and accelerate its transformation in key areas. The addendum to Spain's Recovery Plan, approved by the Commission of Ursula von der Leyen, unlocks access to an additional €93.5 billion in Next Generation funds, comprising €83.2 billion in soft loans and €10.3 billion in non-repayable subsidies. This significant funding supplement complements the €69.5 billion in grants initially included in Spain's recovery plan, which received approval in July 2021.

To date, Spain has already received €37 billion of these funds, with €9 billion provided upfront and €28 billion distributed in the first three payments linked to reform and investment compliance. To fully harness the potential of this financial support, Spain must execute all allocated funds by August 31, 2026. However, concerns have been raised in Brussels regarding Spain's administrative capacity to efficiently manage and utilize the Next Generation funds, highlighting the need for enhanced administrative capabilities to maximize the benefits.

Of note, the addendum was submitted to Brussels by Spain's first vice-president, Nadia Calviño, on June 7, following the announcement of early elections. The Commission's approval comes at a juncture when Spain's political landscape is marked by uncertainty, including questions regarding the formation of a new government and the approval of budgets for 2024. The EU executive maintains that a budget extension would not significantly impede fund execution unless extended indefinitely.

During the negotiations leading to the addendum's approval, Brussels agreed to modify 52 milestones and objectives initially outlined in the original recovery plan. These adjustments became necessary due to factors such as inflation, the conflict in Ukraine, and the ongoing pandemic, which impacted the feasibility and timing of certain measures. One notable change includes the elimination of the obligation to introduce a toll system on national highways starting January 1, 2024.

Spain's argument that this toll system was impractical, given the increased costs for road users due to rising fuel prices, resonated with Brussels. Furthermore, such tolls would have overlapped with new charges that road transport would have faced from 2027 due to CO2 emissions. As an alternative, the Spanish government has committed to promoting rail freight transport, an approach Brussels believes will have an equivalent impact on emissions reduction.

With the Commission's approval, Spain is now positioned to submit its fourth request for the disbursement of €10 billion in Next Generation funds. Some conditions associated with this disbursement were not met due to early elections in July, but Brussels has shown flexibility by modifying or postponing them during addendum negotiations.

It is important to highlight that the demands for pension reform, a crucial component of the fourth payment, remain unchanged. The EU executive will closely analyse whether the changes proposed by Minister José Luis Escrivá adequately address the EU's requirements for fiscal sustainability of pensions.

The addendum to Spain's recovery plan must undergo validation by Ecofin, which has a one-month deadline for completion. No significant obstacles are anticipated following the Commission's positive assessment. Upon receiving approval from finance ministers, Spain will gain access to €1.4 billion in pre-financing grants.

Pedro Sanchez's government has outlined a comprehensive set of reforms and additional investments, with a clear focus on advancing the dual digital and green transition. In terms of ecological transition, these initiatives encompass a national strategy to combat desertification, reforms aimed at enhancing waste management, measures to reduce food waste, and an accelerated approval process for renewable energy projects.

Brussels has also given the green light for the creation of several financial instruments and aid plans designed to support the ecological transition. These include the establishment of a new green line of the ICO, endowed with €22 billion, the creation of a new regional resilience fund totaling €20 billion, the introduction of an aid scheme for the circular economy, and the implementation of a system of premiums for electric vehicles.

Furthermore, the addendum incorporates new investments amounting to €6.9 billion, targeting areas such as self-consumption, energy communities, renewable hydrogen, electricity networks, and industrial decarbonization. These investments are set to play a pivotal role in advancing Spain's sustainability objectives and bolstering its economic recovery efforts.

Source

https://www.elespanol.com/invertia/economia/macroeconomia/20231002/bruselas-aprueba-adenda-plan-recuperacion-espana-da-acceso-millones-ayudas/798920166_0.html
https://www.aa.com.tr/en/economy/brussels-approves-171b-in-eu-funds-for-spain-40-for-climate-projects/3006136

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