the nth italian political crisiswith the resignation of the prime minister, mario draghiand bad omens for its economy, has come at a very inopportune moment for the transalpine country, just after the reallocation of non-refundable European aid for recovery, and with no forecast that there will be a new update later.
In the updated cast, made public on June 30, Spain has strengthened its position as the largest recipient of non-returnable European funds for recovery, according to the review of the allocations made by the European Commission. Thus, it will receive up to 77,200 million euros that it will not have to return in the 2021-2026 period, ahead of the 69,000 of Italy -in second position-, and which represents 7,700 million more than initially planned (see graph).
In this way, Spain will be the country that will benefit the most from aid from the Next Generation fund lost, although the reason is not positive: Spain is the community country whose economy has emerged less strongly from the Covid-19 crisis, and this is a decisive criterion when calculating the final distribution of the 338,000 million in direct aid that will be distributed among the different EU countries in the coming years.
From the consulting firm FI Group, very active in advising companies to opt for the Next Generation funds, they have explained to elEconomista.es that, in the first distribution of European funds in 2021, the community economic forecasts of August 2020 were taken, in which a notable evolution of the Spanish economy was predicted. But with definitive data, the Spanish economy fell by 10.8% in 2020, almost double the EU average. On the other hand, Spain fell below average again in 2021 by growing 5.1%, compared to 5.4% for the single currency area.
“Unfortunately, the recovery of Spanish GDP after the pandemic has been lower than the estimates that had been made. We are the most benefited because we are the ones who are recovering the worst,” says the consulting firm Alba Sánchez.
And it is that article 11.1 of the Community Regulation for recovery funds established that 30% of the Maximum Financial Contribution had to be recalculated based on the final GDP growth data in 2020 and the accumulated growth between 2020 and 2021 , through a formula that takes into account variables related to the population, GDP per capita or the growth of the economy between 2020 and 2021. But the regulation does not include further recalculations beyond those dates.
In addition, European funds are conditional on the fulfillment of economic commitments by the countries, and Draghi already warned, in his last speech in the Italian Senate last week, before the dissolution of the Cortes to hold elections in September, that the The electoral campaign does not help to meet the 55 objectives of the recovery plan planned for 2022, to which 19,000 million of European financing are linked.
At the moment, what Italy does lead the community ranking, with data up to June, is in the European funds already received within the Next Generation program, both non-returnable and those used as financing. In that case, it has already seen 45,700 million arrive, compared to 19,000 from Spain, which ranks second, and which is in the process of receiving 12,000 more from the European Commission.
Destination to be defined
Once the total amount of non-reimbursable transfers available to Spain under the Recovery and Resilience Mechanism (RRM) has been updated, the Government is in the process of updating the Recovery Plan to include new investments.
Spain has to prepare an addendum to the recovery plan in which it explains to what new investments and reforms it will allocate the additional money allocated by the EU, and based on the statements made so far by the Executive of Pedro Sánchez, an important part will be focused on the energy transition.
At the moment, there is also a lack of information on the arrival of these funds to the productive fabric. From Moncloa they affirm that European aid for recovery has already reached 19,000 companies, but they do not detail any economic amount. It is also unknown what part of the Next Generation funds will end up being spent directly by public administrations, and what part will serve to promote projects in the private sector, which continues to call for greater speed and less bureaucratization in the distribution of aid.
There are six countries that have Next Generation funds allocated but have not yet seen them arrive. These are Sweden, the Netherlands, Ireland, Poland, Hungary and Bulgaria.
In addition, after the reallocation of non-reimbursable aid carried out this summer, they will end up receiving less non-refundable aid than initially planned, given that their economy has performed better than expected at the start of the pandemic.
For the same reason, France will have 2,000 million fewer non-reimbursable funds, while Germany It will receive 2,400 million more, since its macroeconomic data for 2020 and 2021 have been worse than predicted.
Only six countries have benefited from the distribution update: in addition to Spain and Germany, Italy with only 100 million more, Portugal with 1,600, the Czech Republic with 500 and Austria with 200 million more.
Spain increases the advantage with Italy in non-refundable EU aid