The interest of companies in European funds falls due to the slow pace of calls and uncertainty

The Spanish Recovery Plan has own profile on the social network Twitter. Although it barely gathers 7,000 followers, it also has it the Digital Kit program, one of the projects of the Plan financed by European funds, which does not reach a community of 1,500 followers. Fewer, about 300, get the Perte (Strategic project for economic recovery and transformation) of new language economyone of the last calls related to the Next Generation of the European Union in Spain.

This overexposure of Recovery Plan on Twitter demonstrates the Government's effort to "reach the entire productive fabric", according to sources from the Ministry of Economic Affairs and Digital Transformation, who list communication campaigns, meetings with companies, with sectors...

The question is whether the Government is really arousing the interest attributed to the Recovery Plan, designed and defended as the mechanism that must transform and modernize the Spanish economy. And financed, "for the first time, jointly, which shows a historic level of collective commitment in the European Union", As stressed by Mercedes Caballero, general secretary of European funds of the Ministry of Finance and Public Administration, last Thursday, in a conference organized by the Funcas analysis center.

The latest survey of business activity by the Bank of Spain (the Ebae for the second quarter) reveals a panorama of certain detachment: only 13% of companies plan to attend a call for the Recovery Plan in the next six months (see graph) . This percentage has decreased in recent quarters. In the third of 2021 it reached 25%, in the fourth of last year it was 23% and in the first quarter of this 2022 had already fallen to 17%.

In absolute terms, 13% corresponds to 440,000 companies, according to the census of almost 3.4 million by the INE (National Statistics Institute). And the Bank of Spain details that the percentage of interested in European funds amounts to 18.7% among companies with 50 to 250 workers, which would involve just over 3,700 companies. Meanwhile, it drops to 10% among the smallest companies (the majority) and also among the largest (less than 500).

The reasons for this growing lack of interest in the Recovery Plan respond to different reasons, which depend on the size of the companies themselves to the impact of the Russian invasion of Ukraine.

"On the one hand, given the expectations generated with the Next Generation EU and the slow pace with which they are being implemented, many companies have lowered the tension and monitoring of these funds," reflects Francisco J. Delgado, professor of Applied Economics at the University from Oviedo. "Those of a certain size continue to have their own monitoring staff, or hire a consulting service, to remain vigilant, but the smaller ones, removing the well-known Digital Kit, may be disconnecting until there are more real opportunities. The risk here for them is misinformation," he continues.

This "slowness" to which the professor refers is also cited by the Bank of Spain. The institution places "the execution and macroeconomic impact of European funds" as one of the main sources of uncertainty for its latest prospects for economic growth, published last Friday, June 10.

"The scant information available suggests the possibility of a certain delay in the execution of spending with respect to the calendar considered in the projections", continues the Bank of Spain, adding that, "in addition, the existing uncertainty about the effective deployment of the projects linked to the Next Generation program could lead to delays in some private investment decisions, as suggested by the qualitative information received by the Bank of Spain from its telephone contacts with a group of non-financial companies in our country”.

A day earlier, the First Vice President and Minister of Economic Affairs, Nadia Calviño, pointed out in the Joint Commission (Congress and Senate) for the European Union that the recognized obligations on the investments of the Recovery Plan barely reach 3,000 million euros, while projects have been authorized for almost 12,000 million. In 2021, 21,000 million were recognized in total, and the Bank of Spain indicates that only about 6,000 million were executed.

On the other hand, "the current economic situation - forecast that until 2024 the pre-pandemic level of GDP will not recover [según la OCDE], inflation and the war…—it is surely causing companies to focus their attention more on business, on a day-to-day basis, than other issues, no matter how relevant they may be", considers Professor Francisco J. Delgado.

"Finally, once the details of the calls become known, with aid intensities, combinations of loans and subsidies, and others, it may be scaring away some companies that expected another scenario more favorable to their interests," he concludes.

"Really the countercyclical effect [el efecto de contrarrestar un golpe en la economías como el de la guerra] it is limited and the implementation times are complicated", recognizes, for his part, Carlos Ocaña, director general of Funcas, who insists that "the important thing is to what extent the funds are capable of favoring the transformation that the Spanish economy needs [son claves los Perte del vehículo eléctrico, el de los chips y el de la transición ecológica]".

The effect of the European funds on the economic growth of Spain in 2021 was practically imperceptible. By 2022, it is estimated that activity will accelerate by 1.5 percentage points. The greatest impact will be in 2023, of up to two points, according to the expectations of the Bank of Spain.

Calviño herself has confirmed that the Government will present at the end of this month an addendum to the European Commission to increase the amount that corresponds to Spain from European funds, close to 140,000 million euros, 70,000 million in aid and the same amount in loans.

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