Brussels will review its allocation of funds to Spain after seeing the labor and pension reforms




The Kingdom of Spain has pre-allocated 69,513 million euros in non-refundable transfers, or as some prefer to say, 'non-refundable', and another 70,000 million euros in low-interest loans within the European Recovery and Resilience Mechanism (MRR ), whose objective is to support the recovery of the European economies hardest hit by the pandemic, among which Spain is the most affected.

But this photo is not immovable and, in fact, it will be reviewed by the European authorities in the first half of this year, already with the information in hand of the first steps taken by the countries to fulfill the investment and reform commitments. that they agreed with the Commission.

The Brussels examination, in which Spain is gambling the 50,000 million in transfers and the 70,000 million in loans that it still has pending to receive, will take the two main structural reforms to which it committed itself on track.

The pension reform, approved by Parliament, at least in its 'first phase', and the labor reform initiating a parliamentary process whose outcome seems uncertain, amid pressure from the left wing of the 'legislative bloc' to go further in the minimum pact closed by Yolanda Díaz with businessmen and unions and the risk that any modification will blow up the much publicized social consensus of the same.

Brussels objections

The fulfillment of the formal commitment to have the pension reform already operational and in Parliament the normative text that supports the labor reform guarantees the Government that the European authorities will not put any objection to enabling Spain's access to the 12,000 million of the second disbursement of the Recovery Mechanism, but they do not suppose any shield in the process of review of the allocations of the Mechanism that Brussels will address shortly.

Sources from the Government's economic area express their full confidence that Spain will maintain the initial pre-allocation made by the Commission with the argument that it is the European country that has made the most progress both in the definition of its Recovery Plan and in its execution, more beyond the doubts generated at the domestic level by the slowness in activating investments with European funds. What is transferred from the Government is that the reproaches to the management of European funds in Spain are an exclusively domestic phenomenon and that, quite the contrary, in Brussels the Spanish case is used as an example of good practices in this area.

The official account contrasts, however, with the messages slipped by European Commission officials on their visits to Spain. According to sources familiar with what was discussed in those meetings, Brussels has not hidden in these meetings its concern about the difficulties of the Spanish Executive to launch the investment and reform program envisaged in the Recovery Plan and has not hidden its skepticism regarding the Capacity of the changes introduced in the pension regulations to improve the future sustainability of the system, which is the milestone to which the Government of Spain has committed to with the Commission.

Prove compliance

Brussels' reservations in this regard can be seen very clearly in the Operational Agreement signed with the Spanish Government, which, as the European authorities have underlined, is the binding contract by which compliance or non-compliance with the milestones will be measured. planned.

In this document, the European Commission requires the Government of Spain to explicitly accredit in a report that the implementation of the new permanent ERTE mechanism will not add more pressure to the public deficit, that is, that it will not result in losses for the public treasury; calls for another report to show that regulatory changes in collective bargaining will not alter the balance between worker safety and the necessary flexibility for companies; and demands that the reform reduce the temporary employment rate and lower youth and long-term unemployment rates ... in figures.

It has also sown the path of pension reform with caution. According to several sources who had the opportunity to speak with the officials of the European Commission in his last visit to Spain, the European Executive is disappointed with the orientation of the first phase of the pension reform. It considers that it deactivates useful tools, such as the decoupling of the updating of the CPI benefits, and that it compromises rather than solves the financial future of the public system.

Brussels expects for 2022 new measures that contribute to the sustainability of the system. It has already demanded that the Government explain with figures how the Intergenerational Equity Mechanism is going to help reduce the financial pressure of the system, which provides for a rise in company prices; and also an evaluation of the first phase of the reform to see if it really contains pension spending.

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