Sunday, July 3

The Government prepares another recovery ‘mini-plan’ with new reforms and investments

Spain will have to assume a new list of reform and investment commitments productive if you want to access another 70,000 million euros of European money, this time in the form of reimbursable soft loans, with which to finance projects between 2023 and 2026. In the Recovery Plan approved in July by the European Council, the Government has already committed 212 measures to access 70,000 million in non-refundable money. To these 212 measures (110 investments and 102 reforms, among which are labor, pension and fiscal reforms) it will be necessary to add another ‘mini-plan’ from now on, with an additional list of reforms and investments that the Executive will have It must be fulfilled as a condition for access to this European money, as confirmed by sources from the Ministry of the Economy and the European Commission.

The economic vice president, Nadia Calvin, announced this Tuesday that the Government’s intention is to present this addendum in 2022, in order to be able to deploy the loans throughout the second phase of implementation of the Plan, between 2023 and 2026. Later, in the ‘Execution Report of the Recovery Plan ‘of December, which was posted on the La Moncloa website, it could be read that “the Government is already working on the design of an addendum to the Recovery Plan, so that the loan application can be integrated into the budget cycle of the General State Budgets of 2023 “. The document adds that “for this, an exercise has been carried out to identify potential projects and investments to be financed.”

Return of amounts

Member States have until August 31, 2023 to request these loans from the European Commission. “As with the transfers, the disbursement of the loans is made by tranches and they are linked to the fulfillment of the committed milestones and objectives,” the Economy document clarifies. The funds may be channeled directly through the ministries, “or through financial intermediaries” (such as financial entities) through “loans, guarantees, capital investments or joint-ventures [asociación empresarial]’.

The recovery ‘mini-plan’ must establish the investment calendar until 2026 so that they can be integrated into the successive General State Budgets. Like the Recovery Plan, this ‘mini-plan’ or addendum must be approved by the European Commission and the European Council -as stated in the european regulation-, after validating that the loans will go to investments (and not to current spending) and that the new reforms match the recommendations of the European semester aimed at Spain.

According to sources from the European Commission, the ‘mini-plan’ should also include the calendar for the return to Europe of the amounts loaned, as happened with the money that was loaned to Spain for the rescue of the bank in 2012, with a return planning until 2027. In the latter case, until 75% of the 41,333 million of the bank rescue is returned, the so-called ‘men in black‘of the European Commission to monitor the fulfillment of the commitments of that time.

Fear of rate hikes

Contrary to the strategy of other countries such as Italy, the Spanish Government opted for a Recovery Plan focused exclusively on receiving 70,000 million euros in non-refundable grants from the European ‘Next Generation EU’ mechanism. However, the own document presented in April In the past, he anticipated that “the activation of the loans provided for in the Recovery and Resilience Mechanism” would be carried out “in parallel with the transfers during the 2021-2026 period.”

The government has not explained why it decided not to apply for the loans from the outset, or why it is doing so now. The first decision was able to weigh the intention of processing as quickly as possible.In this last decision, the recent expectation of a tightening of financial conditions after the the rebound in inflation is leading central banks to announce the withdrawal of their monetary stimulus. The fear of a rise in interest rates of public debt earlier than expected a few months ago could have led the Government to secure as soon as possible the most advantageous financing that the European Commission will undoubtedly be able to provide to Spanish investment projects. It is not yet known at what interest rate the money will be lent but it will be at the same rate that the European Commission has been able to finance in the markets.

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New ertes

The Government has already anticipated that this European funding may be applied tol fondo ‘Next Tech’ launched to drive the growth of digital companies and investment in high-impact technology projects. It also hopes to be able to apply this European funding to new permanent mechanism of ertes. “In order to support this reform, inspired by existing models in other European countries, it is expected to use the credits of the Recovery and Resilience Mechanism from 2022 to finance the public component of said Fund,” the plan stated Spanish. According to the Minister of Finance, María Jesús Montero, the Budget project for 2022 has already incorporated the provision of requesting a first tranche of 1,270 million euros in European credits to finance the PERTE of the electric vehicle.

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