Spain’s work in front of Brussels accumulates in the last part of the year and this directly affects the treatment planned for 2024 of the Next Generation funds. The Government is accelerating the pace so as not to derail the calendar, but time is running out and the Executive is considering a forced postponement. Barely three months before the end of the year, Spain must still request the fifth and sixth installments of the Pandemic Recovery Plan to respect the agenda agreed with the Community Executive. And although he reiterates his intention to request the fifth disbursement before the end of the year, everything indicates that at a minimum, the sixth section will not arrive on time and will have to be managed in 2025.
Concretely, pushing the request for the fifth payment to the extreme, at the end of the year, would necessarily amount to postponing the sixth disbursement, also planned for 2024. This is a point of 4 billion euros in funds and 14 billion euros in loans that would be delayed on schedule.
So far, the guideline agreed between the community and the Spanish executive was clear and indicated that the government should request the fifth and sixth disbursements of the Next Generation funds throughout 2024. Doubts, however, emerged on Tuesday last at the EU Economy and Finance meeting. Ministers who took place in Luxembourg. The Spanish head of this department, Carlos Body, tried to brush aside the question of his commitment to the calendar. The fifth section, he assured, will arrive on time. And he said it was “realistic” for the Government to ask Brussels, before the end of the year, these 7 billion euros, distributed in 6.5 billion in non-repayable grants and 500 million in loans.
But it is no longer simply a question of the government not respecting the agenda agreed with Brussels. Added to this is the fact that, even if Spain achieved this objective of requesting the fifth tranche before the end of the year, Evaluation delays will make it impossible to obtain funding in 2024nor the fifth section and, of course, the sixth section.
The procedure indicates that after a payment request, the The European Commission has two months to carry out your assessment on the achievement of milestones and objectives. The EU Council, i.e. the member states, then have four weeks to decide whether or not they support the decision. The Community Executive’s analysis period may be extended in the event of vacations or requests from Member States.
But the alarm signal from Brussels was really felt in June. As part of his country-specific recommendations, he urged Spain to tackle “emerging delays” of the recovery plan. In any case, the established schedule is indicative and it is not a big problem if countries do not respect the two payment requests planned for each year. If there is an example of such a situation, it is Germany, which developed a broader request in which it grouped together the backlogs of accumulated payment requests.
Tax reform
The other obstacle that the Government will have to overcome is tax reform. Presented in the fifth disbursement, tax reform promises to be one of the main tensions between the government and the European Commission and possible cause of further delays in the application and, consequently, in the execution of the plan. If Spain stressed in June that it considered this reform to be settled, Brussels did not agree. I warned him that there was still work to be done in this regard. And, in case the government runs out of ideas, in its spring recommendations it suggested measures such as increasing VAT, taking into account the most vulnerable groups, or introducing environmental taxes.
For the moment, negotiations between the Government and Brussels for this reform are continuing. The recovery plan requires modernized and simplified taxation, but the divergence between the two leaders’ expectations could delay negotiations. In the event that the European Commission ultimately concludes that what was expected for this reform, partial payment may apply. Which would give Spain six months to correct errors and access pending funding.
The root of this delay actually lies in the fourth payment and the accidental approval of the unemployment benefit reform. The request for the fourth disbursement was made a few days before the end of 2023, in time to meet the schedule. However, the non-validation in Congress of the unemployment compensation reform, After Podemos’ refusal at the start of the year, the time was delayed.
The Commission extended the analysis after Spain requested to modify some technical details of the recovery plan and add some flexibility due to the European elections. The Commission’s evaluation process, which usually lasts a maximum of three months, lasted six months and allowed the entry into force of the unemployment compensation reform as approved. The direct consequence of this was that the amount suspended for partial payment was much lower than what the unemployment benefit reform would imply. In the end, they totaled 130 million for a program linked to the digitalization of SMEs. The countdown to completing these outstanding tasks is now three months away.
Behind the complications of the fourth payment lies the reality of parliamentary arithmetic which leaves a delicate scenario of agreements to move forward on measures, including those of the fifth and sixth payments but also other commitments that the Executive must send to Brussels. like the budget plan. The tight schedule of sessions of the Congress of Deputies that the Government plans for the last months of the year has as protagonists other important measures linked to the working day, the Land Law, regional financing or the package of Housing measures .
