Spain is failing to bring EU pandemic recovery funds to bear on its economy. The government has dispersed less than half of the millions it has received in ‘Next Generation’ funds in the last two years, and only a sliver of those funds have reached businesses as promised. The ‘Next Generation EU’ is the EU’s shared debt program intended to help the bloc recover economically from the pandemic.
According to the most recent data from the General Comptroller of the State Administration (IGAE), through November 2022, the payments made amount to €8,237 million, 29% of the total budget for 2022 within the framework of the Recovery and Resilience Mechanism.
This marks the second year in a row that the socialist-communist coalition government of Pedro Sanchez has failed to adequately use the generous subsidies from the European Union. The 2021 fiscal year had already ended with payments of funds from the Recovery Mechanism amounting to just 45% of the €24,198 million budgeted, according to economist Santiago Sánchez.
Additionally, almost all of the funds dispersed so far have gone to the public administration for government projects including social rental housing, rehabilitation of public buildings, high-speed rail lines, modernization of municipal markets and commercial areas, sustainability tourism, long-term care, and inclusion policies.
A report from The Esade and EY Observatory of European Funds showed that companies had only received €2 out of every €10 awarded in subsidies. Two additional assessments from independent institutions make the impact on GDP for 2022 between 0.8% for AIReF and 0.6% for the Bank of Spain.
In Spain, the government designed two programs to get the Next Generation Funds into the private sector, the Kit Digital and the Proyectos Estratégicos para la Recuperación y Transformación Económica (Perte). The first is targeted at the self-employed and small businesses (up to 50 employees) with small grants of up to 12,000 euros for basic digital services such as building an online marketplace or increasing cybersecurity. The Perte grants are multi-million-euro awards directed towards large companies and divided into twelve categories, including electric car manufacturing, renewable energy, and agrifood. Volkswagen-SEAT, for example, is hoping to capture hundreds of millions of euros to build one of the biggest electric car battery factories in Europe in the region of Valencia.
But the slow pace of the program’s rollout and disbursement of money, plus excessive bureaucracy, has left many companies that could potentially benefit from the programs hesitant to even apply. Libre Mercado reports that only 6,000 companies applied in the last round of calls for proposals, barely 0.18% of the nation’s productive network. Additionally, a poll done by the private firm Grant Thorton, found that only 17% of companies planned to participate. Two other polls also found that the high level of bureaucracy plus the complex and unclear requirements were the main reasons businesses did not intend to apply for funding. In one study, 43% of participants cited the difficulty of designing projects to meet ideological requirements such as “equality” and “the ecological transition.”
The Confederación Española de Organizaciones, the leading representative of the business sector, called on the government to reduce bureaucracy, publish calls for proposals more rapidly, increase flexibility in the projects eligible for aid, and make the funds more readily available to the self-employed and small businesses.
And while observers doubt 2023 will see a vast improvement in managing the funds, Spain’s president has asked the EU for an additional €89,000 million. As it stands right now, the government is preparing a huge amount for the next generation without any substantial benefits.