October 1, 2020

Why it is important to have budgets to receive the 140,000 million from the European recovery fund


Is it written somewhere in Brussels that you need approved budgets to receive recovery funds? No. At some point in the negotiations, has Spain been asked to have approved budgets between now and the end of the year to receive money for the pandemic? Absolutely. Now, while the 140,000 million of the recovery fund allocated to Spain are designed for the coronavirus crisis and conditioned to promote reforms of digital transition, energy and the recommendations of the European semester – the economic governance system of the European Commission -, it is important that there are new accounts: the items of Cristóbal Montoro’s budgets for May 2018 did not understand either pandemic or coronavirus, nor from a crisis that will make Spain end 2020 with a drop in GDP of around 10% nor from a European fund that was not at the head of any oracle.

These are the reforms that the EU requests from Spain in exchange for the 140,000 million from the recovery fund

These are the reforms that the EU requests from Spain in exchange for the 140,000 million from the recovery fund

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That is to say: it is not so much a purely technical problem, as that to correctly channel the funds for what they are intended, budgets are needed. Why? Because the funds are intended to finance specific programs designed by the countries, which if they are not inserted in a budgetary framework, are more complicated to design. And sometimes it can be impossible. “Benefitting from the Recovery and Resilience Fund, and our evaluation of the draft budget plans are separate processes,” recall community sources.

It is true that Montoro’s budgets did not foresee the ERTE coverage promoted by the Minister of Labor, Yolanda Díaz, for example, which currently represents a disbursement of more than 20,000 million. But it is also true that, if the world of May 2018 has nothing to do with the world of September 2020, the budgetary framework suffers to adapt to such an extraordinary historical moment.

The President of the Government himself, Pedro Sánchez, stated this Tuesday in an interview on SER: “[el presupuesto de Montoro] It does not include those instruments necessary to link all the economic resources that will come from Europe next year. Those 140,000 million, 72,000 million of them in direct transfers, to make that digital transition, that ecological transition, that necessary territorial cohesion that our country needs. These old budgets will not be able to absorb these economic resources, nor will they attend to those social emergencies. “Are Europe’s aid in danger?” If these budgets are not approved, they are compromised from the point of view of the capacity that have the Executive and the autonomous communities and municipalities in the absorption of these resources and, therefore, in their levels of execution. Right now we do not have instruments recognized in the budget to be able to absorb that enormous capacity of resources that is going to come from Europe. ”

To address new policies with Montoro’s accounts, “budgetary modifications would have to be undertaken,” government sources explain, adding: “There are difficult items to execute without new budgets, and those that exist are limited to face new challenges.”

“We are talking about the mobilization of public and private investment”, said this Monday the economic vice president, Nadia Calviño, in her speech at the UIMP, “of the catalytic capacity of public resources, of priority projects, of the driving capacity on economic growth and job creation. But it seems that we are not aware that all this requires General State Budgets appropriate to the current reality and that allow us to channel national public resources and, very fundamentally, to community resources, which have a key role in the coming years so that we can realize those desired, shared uses of the reform and investment program that our country needs. ”

Cast in three years

In any case, apart from the fact that it is more necessary than essential to have budgets to receive European money, there is another pending issue: the recovery fund in Brussels has not yet been approved. And, when it is approved, the money is expected to be distributed between 2021, 2022 and 2023. That is, it is not that there is an ATM for Spain with 140,000 million waiting for the 2021 budgets to be approved to be emptied.

What’s more, there are other European funds approved in 2020 to which Spain has successfully chosen. For example, 21,300 million granted in loans to finance ERTE on behalf of the SURE program of the European Commission. And you also have at your disposal as much from the MEDE sanitary, to which it does not resort for fear of the stigma of the European bailout fund.

That is to say, there is European money that is arriving and that can reach the margin of the recovery fund linked to the 2021-2027 EU multiannual financial framework – EU budgets – and, also, outside the Spanish budgets. But, it is that, in addition, the European budgets are not approved either.

Indeed, in this hypothetical ATM, it is not that there are not 140,000 million for Spain, it is that it is empty. Why? Why although leaders agreed to a recovery fund in July after five days of negotiations, remains the parliamentary procedure.

It is true that the European Parliament is hardly going to overturn an agreement of the 27 heads of government, but it is also difficult that the only body elected by universal suffrage is going to swallow multi-annual budgets without contributing anything. In fact, negotiations have already started, and the main groups in the European Parliament – EPP, S&D, Renew and Greens – have formally asked to tighten the conditionality of respecting the rule of law to access European funds – thinking of Hungary and Poland. And, if the liberals and the right-wing -PPE, ECR and ID- were to agree, they would even have a majority to tighten economic conditions if they proposed it even at the risk of blowing up the global agreement with the socialists, both at the summit and for the Community Executive – the EU is governed fundamentally between popular, socialists and liberals.

European Parliament approval required

But time is short: the current EU budgetary framework ends on December 31 and funding for the next seven-year cycle is not yet secured. In addition to the 2021-2027 budget requiring the approval of the European Parliament, it requires national parliaments to ratify the EU recovery fund of 750,000 million euros that would be established through debt issued by the European Commission from the EU budget – ultimately to national contributions.

As the Council and Parliament enter into talks to reach an agreement on the budget, many are also working on a bill on how to spend the 673 billion euros of the EU recovery and resilience fund – the rest, up to 750,000, is money that is contributed to programs run by the European Commission through the EU budget, not programs designed by governments.

In parallel, countries are drawing up their national recovery plans, which they must submit to access EU recovery funds. These plans will need the approval of the Commission and the endorsement of a qualified majority in the Council. But not the prior existence of new national budgets as a sine qua non condition.

The talks on the MFF agreement – EU budget – will continue on 7, 11 and 18 September; although Parliament will not be able to vote until October at the earliest. If there is no deal by January 1, the budget would be rolled over without the new spending programs – including the recovery fund – and without one of its current large net contributors, the UK.

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