September 24, 2020

Where will the 140,000 million for Spain from the European recovery fund go? Renewables, energy efficiency and broadband deployment

Spain aspires to 140,000 million euros from Europe in the next three years: 72,700 in transfers and 66,300 in loans. Of these, 56,000 in direct aid will come directly from the Recovery and Resilience Mechanism, while what is missing will go into the new items of the community budgets for cohesion and the fund that will support the decarbonization of the regions.

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But why can you ask for that money? What will the European Union finance in the form of loans or grants? This Thursday the European Commission has published a guide with which it tries to answer many of these questions by marking a series of priorities for the disbursement of funds.

Thus, Brussels establishes that the recovery funds managed by the Member States directly through reform programs that can be financed through the Recovery and Resilience Mechanism –672.5 billion of the 750,000 of the total fund; the difference, 77.5 billion, will go to European Commission programs within the multi-annual budget – they must focus on promoting digital and green transitions and be aligned with the European Semester – the community economic governance system, which makes recommendations by country – which in his latest report he asked Spain to improve its health systems.

In this way, Brussels calls for projects in the following areas: anticipation of clean technologies prepared for the future and acceleration of the development and use of renewable energies; improvement of the energy efficiency of public and private buildings; promoting future-proof clean technologies to accelerate the use of sustainable, accessible and smart transportation, charging and refueling stations, and the expansion of public transportation; deployment of broadband services in all regions and homes, including fiber and 5G networks; digitization of public administration and services, including the judicial and health systems; Europe’s digital cloud for industrial data and the development of more powerful, cutting-edge and sustainable processors; adaptation of education systems to support digital skills and educational and professional training for all ages.

But when should Member States present their recovery and resilience plans? The European Commission affirms that the Member States “can formally present their plans from the moment the mechanism legally enters into force”, which is expected on 1 January 2021, when the negotiations for the multi-annual budget (MFF 2021- 2027), the procedures in the European Parliament, national parliaments – to increase the spending ceiling – and the European Commission begin to issue the debt to finance the fund.

In any case, Brussels establishes the deadline for the presentation of the plans in April 30, 2021. However, “the European Commission encourages the Member States to present their draft plans as of October 15, 2020. Member States can finalize their plans after the initial submission of the drafts. ”

“According to the conclusions of the European Council, a pre-financing of 10% of the financial contribution must be paid to each Member State”, Brussels continues: “This payment could be made after the approval of the plan through the Council’s implementing decision and the adoption of the legal commitment by the Commission, which means that the funds could start arriving as early as the first half of 2021. ”

Within the framework of these first approaches is framed the visit of the economic vice president, Nadia Calviño, to Brussels ten days ago, when she met with all the economic commissioners of the Community Executive. “The Commission is already available at all levels to collaborate with the Member States in the preparation of their plans,” they say in Brussels.

The Commission will analyze whether the investments and reforms established in the plans contribute to “effectively addressing the challenges identified in the specific recommendations of each country”; they contain “measures that contribute effectively to the green and digital transition”; and “contribute to strengthening the growth potential, job creation and economic and social resilience of the Member State”.

The evaluation of the plans by the Community Executive must then be the Council – the governments of the 27 – through an execution decision proposed by the Commission.

What is “investment” or “reform” for the European Commission? Brussels “will support investments and reforms that have a positive and lasting impact on the economy and society. The measures should address the challenges identified in the context of the European Semester, facilitate ecological and digital transitions and strengthen the potential for growth, creating employment and the economic and social resilience of the Member State “. In other words, “a broad concept of investment in fixed capital, human capital and natural capital is used. Fixed capital is related to investments, for example, in infrastructure, buildings, but also in some intangibles such as research and development, patents or software. Human capital is related to spending on health, social protection, education, training and training. Natural capital are actions that aim to increase the proportion of renewable natural resources, protect or restore the environment, mitigate or adapt to change. climate”.

“The reforms”, says the European Commission, “must be understood in a broad sense, related to actions or processes aimed at making lasting improvements in the functioning of markets, institutional structures, public administrations or key policies, such as green and green transitions. digital”.

The allocation mechanism consists of taking into account “clear, realistic, well-defined, verifiable milestones and goals and directly determined or influenced by public policies.” Once the milestones and objectives indicated in a recovery and resilience plan have been met, “the Member State will submit a request to the Commission for the disbursement of financial assistance. The Commission will prepare an evaluation and request the opinion of the Economic and Financial Committee [órgano formado por el Consejo de la Unión Europea y la Comisión Europea] on the satisfactory fulfillment of the relevant milestones and objectives “.

And it advises: “In exceptional circumstances in which one or more Member States consider that there are serious deviations from the satisfactory fulfillment of the milestones and relevant objectives of another Member State, they may request that the President of the European Council submit the matter to the next European Council. If the Member State has not satisfactorily met the milestones and targets, the Commission will suspend all or part of the financial contribution to that Member State “.

The latest recommendations to Spain

With the new European Commission, the European Semester in its spring recommendations by countries has assumed for the first time the indicators related to the 2030 Agenda. That is, pointing out the shortcomings in social services, which have a lot to do with the recipes decreed in the last decade, but which also open a new horizon of reforms in a direction contrary to that of the previous crisis.

“The Spanish health system has been offering good results despite the relatively low level of investment,” stated the European Commission in its report on Spain, last May: “However, the outbreak of the COVID-19 pandemic has exerted unprecedented pressure on the system and revealed its vulnerability to crises. The pandemic has revealed existing structural problems, some of which stem from certain deficiencies in investment in physical infrastructure and deficiencies in labor and workers’ working conditions Of the health”.

And Brussels makes several concrete recommendations to Spain: firstly, “that it take all necessary measures to effectively address the pandemic, sustain the economy and support subsequent recovery. When economic conditions permit, apply fiscal policies aimed at achieving prudent fiscal positions in the medium term and ensure debt sustainability, while improving investment Strengthen the resilience and capacity of the health system, in terms of health workers, necessary health supplies and its infrastructure “.

Second, “support employment through agreements to preserve jobs; strengthen protection against unemployment, improve coverage and the adequacy of minimum income programs and family support, as well as access to digital learning.”

Third, “to ensure the implementation of measures to provide liquidity to small and medium-sized enterprises and the self-employed, including avoiding late payments. Focusing investment on the green and digital transition, in particular in promoting research and innovation, clean and efficient production and use of energy, energy infrastructure, water and waste management and sustainable transport. ”

And lastly, “improve coordination between the different levels of government and strengthen the public procurement framework to support the recovery efficiently.”

An important change in the operation of the European Semester from 2021 will be that the European Commission will stop issuing specific recommendations for countries that present reform and resilience plans to receive funds: the Commission will evaluate those plans as a preliminary step to grant the money. “This makes the resilience and reform plan the central document for economic policy coordination at least until 2023, when the last 30% of anti-crisis funds will be committed,” explains Lucas Guttenberg, from the Delors Institute: “The European Semester as we know it is practically dead, that is a good thing, and now something new is emerging. In this new structure, reform plans will guide everything, and what will be included in them will be fundamentally political decisions of the Member states”.


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