The Government has committed to Brussels to carry out another 18 structural reforms -in the field of energy and employment, among others- in order to access 84,000 million euros in loans with favorable conditions and another 10,300 million euros of transfers non-refundable, framed in the Recovery Plan.
This has been included in the addendum to the Plan, approved yesterday by the Council of Ministers after “intense negotiations” with the European Commission and when there are only 47 days left for the general elections, from which a new Executive could emerge that is not satisfied with those reforms agreed with Brussels.
According to the regulation of European funds, Spain had until August 31 to submit this extension of the Plan, but the Government has decided to do so today, after approving it yesterday, and not wait for the elections to pass. “The deadline ended in August and it was unrealistic to think that new work could be started after the elections. We approved this addendum out of responsibility and for not putting a brake on the process underway,” said Nadia Calviño, first vice president, on Tuesday. who also insisted that during the consultation process they have listened to the proposals of all the communities and political parties, including the PP.
Calviño has publicly said that if, should the case arise, the Executive that comes out of the polls wants to make changes during the two months that the Commission has to evaluate the addendum, “it will be able to do so without problem”, but during this process, changes of weight. According to government sources, “more than 50 meetings and the exchange of 750 documents” have been necessary to be able to agree with Brussels on the document approved this Tuesday, which seems to leave little room for changes in both investments and reforms.
In exchange for these funds, the Executive has promised Brussels that it will undertake 18 new structural reforms, focused mainly on the energy field (deployment of renewable energies, decarbonization, energy efficiency, improvement of agricultural and livestock farms and promotion of the circular economy), although also with developments in the labor market, to improve active employment policies, the adjustment between supply and demand for jobs and training for employees and unemployed. Far-reaching measures that the next Executive will have to abide by if he wants to be able to access these funds.
“An additional effort must be made in coordination and adjustment of the labor market, because with the rate of job creation that we have, it is necessary to prevent imbalances from affecting employment,” state government sources.
The reforms will also include measures to attract and retain talent, promote access to housing and social protection and improve the efficiency of the public sector and its fiscal responsibility, although details of them have not been disclosed. According to government sources, “weighty reforms” in tax or pension matters are ruled out.
“The addendum includes 18 reforms that will reinforce the measures included in the Plan and will make it possible to ensure a model of sustained and sustainable growth. To this end, the measures aimed at increasing productivity and potential growth of the economy will be further promoted, the strengthening of strategic autonomy and economic, social and territorial cohesion will be strengthened, with a focus on fiscal responsibility and the sustainability of public accounts in the medium and long term”, explained the Government.
The next Executive that leaves the polls on 23J will not only have to undertake these measures, but will also have to complete all those that have remained pending from the initial Recovery Plan, including, for example, the tax reform, which in Moncloa they do not terminate. Compliance with all these reforms is mandatory, since the regulation of the Recovery and Resilience Mechanism contemplates penalties in the event that countries want to revert the agreed and approved reforms, such as the pension reform, which was approved in Spain only with the approval of the unions and the opposition of the bosses.
In addition to promising new reforms and investments, the Government has taken advantage of the addendum, as other countries have done, to modify the initial Recovery Plan. On the one hand, the terms of some investments and reforms have been extended that there was not enough time to carry out in the time commitment and, above all, the endowment of some investments that have fallen short due to the impact of inflation has been increased, raising the their budget.
The additional 10,300 million euros that Spain will receive in transfers will be used entirely to reinforce strategic projects, the Perte, which will also be able to access up to 17,900 million euros of loans.
The rest of the credits will be used to endow different State funds -some pre-existing and others new- to channel financing to the private sector under advantageous conditions. For example, the sustainable investment fund of the autonomous communities will have 20,000 million; the Fund of the Official Credit Institute (ICO) will have 22,500 million; and the fund for tax incentives for green investments by families and companies will have a budget of 2,200 million.
Companies will be able to request financing from these organizations and, as they are granted -with the intermediation of the European Investment Bank, in some cases-, the Government will present to Brussels the documentation that proves these associated disbursements of investment milestones and the Commission will be transferring the corresponding money to Spain. Although the country has 84 billion euros at its disposal, in practice it could request much less.
The European Commission will obtain these funds from the issuance of debt in the markets, which today is trading 30 basis points below the yield of the ten-year Spanish bond, that is, under more advantageous conditions. However, in December that difference was 50 points and as interest rates rise, the difference could narrow and this type of financing could be less attractive, since the interest rate will be the market rate at all times. In any case, it will always be better than the one obtained by the Kingdom of Spain.
For the country, it will be cheaper to finance itself with these loans than issuing public debt, but it must take into account that all these loans from Europe will be included in the public debt and that, in some cases, the intention is not to substitute a source of financing for another but to complement it, which could increase the debt to GDP ratio even more.
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