Madrid When the EU heads of government agreed on the European reconstruction fund in the summer, the Spanish Prime Minister Pedro Sánchez received applause from his cabinet on his return from Brussels. The fourth largest economy in the EU receives 70 billion euros in non-repayable aid from the European reconstruction fund – more than any other country. The money is intended to help fight the consequences of the corona pandemic and make the Spanish economy fit for the future. But the allocation of the EU billions is not picking up speed.
Sánchez wanted to spend 27 billion euros of this this year. But by October, according to calculations by the economist Raymond Torres on the basis of the government portal, tenders worth 5.7 billion euros had been launched – 20 percent of the plan. Companies complain about the slow implementation. The government is now doubling its weekly meetings and wants to accelerate by the end of the year.
“If the money flows only slowly and there is no short-term stimulus for the economy, the quality of the projects must be all the better,” says economist Torres, head of business cycle analysis at the Foundation of Spanish Savings Banks, Funcas. “The projects then really have to initiate the restructuring of the Spanish economy.” So far, however, nothing has been seen, the money has so far been mainly used in projects that are easy to implement, such as the energetic insulation of buildings.
The corporations are frustrated. They already have their plans for the expected tenders in the drawer – and are waiting for it to start. After all, the government has promised the carmakers to start tendering for the electric car by the end of the year. Only then can the companies submit their offers for the projects specified in the tender. In the next step, the Spanish authorities award the contracts and only then does the money flow from Brussels to the companies.
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In the aviation industry, however, everything is still open. The aircraft manufacturer Airbus criticized in an internal report last week the “lack of coordination and leadership between the authorities” in the allocation of the money from the reconstruction fund, as the newspaper “El País” reported. The official position of the group is of course different. One understands that the large projects “and their complex coordination between the industry and the EU by the Spanish government” take time, according to Airbus.
Enel cuts investments for Spain
Aviation is one of five strategic projects (“Perte”) for which the Spanish government wants to establish a kind of fast track in order to accelerate their implementation. So far, the cabinet has formally decided on two experts: it already decided in July to do this for the development of the electric car and a few days ago it also decided on an expert for the healthcare industry. However, there are still no specific tenders. According to official information, the expert for the airline industry is still “under review”.
Not only Airbus is frustrated. The Italian energy company Enel has already cut its investments in Spain until 2023 due to the delay in the allocation of funds from the European reconstruction fund. The group wants to spend 400 million euros less in the next three years because it is not yet clear when and how the EU funds will be used.
EU: Spain will grow less than average in 2021
Due to the meager flow of EU funds, there is no strong impetus for growth this year either. The EU Commission assumes that Spain will grow by only 4.6 percent this year – less than the EU average. And this despite the fact that the economy collapsed by 10.8 percent during the pandemic – more than in other countries. The high electricity prices in Spain and global supply bottlenecks are also responsible for the subdued growth forecast.
The Spanish government rejects the criticism and is sticking to its estimate of 6.5 percent growth for this year. Economics Minister Nadia Calviño recently stressed that Spain has made the furthest progress in implementing the reconstruction plan. Spain is the first country to which the EU Commission promised last Friday the first regular payment under the reconstruction fund – of ten billion euros.
Madrid has implemented the 52 agreed goals and reforms, according to Brussels. The Spanish government is now trying to accelerate investments. The Cabinet will meet twice a week until the end of the year, instead of once a week as usual.
Experts see administrative bottlenecks as one of the reasons for the delay in the allocation of funds. The government wanted to abolish this for the reconstruction funds – but it has not worked so far. According to a survey by the management consultancy EY and the business school Esade, one fifth of the responsible administrative employees and company managers also state that they do not have sufficient information about the new funds. The authors of the study describe this percentage as “striking” and criticize, among other things, the lack of an independent supervisory body that could accelerate the allocation of funds from the funds.
Unusually sharp criticism from Brussels
But also the type of project award is more complex in Spain than in other countries, according to Torres. “Among other things, anti-corruption regulations ensure that all details for projects have to be tied down before the aid funds are awarded, which slows down the processes,” explains the economist. “In Italy and France, the award is quicker because the control takes place after the fact.” However, it still has to be found out which procedure is more successful. “If money is given out quickly, it can lead to poorer quality investments,” said Raymond Torres.
Nonetheless, there is great dissatisfaction with the trials in Madrid. Criticism comes in unusually sharp form even from Brussels. “The European reconstruction fund has clearly monopolized the attention and administrative capacity of most member states,” said Marc Lemaitre, head of the European Commission’s Directorate-General for Regional and Urban Policy, a few days ago in the EU Parliament.
But Spain stands out and has postponed the submission of its projects for around 36 billion euros from the EU Cohesion Fund for the years 2021 to 2027 to 2022 “in a very sad and almost incomprehensible way”. “At least Spain has shown that it is unable to do two things at the same time,” etched Lemaitre.
More: Interview with Nadia Calviño: “It is also in the German interest that Spain grows strongly”