Brussels unlocks another 6,000 million in aid to Spain after endorsing the fund control system

White smoke with the deadline consumed: the European Commission has unblocked the third tranche of the funds of the recovery plan assigned to Spain. This is 6,000 million euros, which is added to the 31,000 million already received in previous disbursements. Brussels has said yes this Friday through a preliminary evaluation, in which it has endorsed the achievement of the milestones and objectives to which the Government of Pedro Sánchez had committed to release that part of the aid. On this occasion, the positive evaluation comes with a but, which has been the cause of the delay: the audit and control system of the funds designed by the Government. The community authorities give a call to attention to the Government because this mechanism arrives late, but it considers the improvements that it demanded to have been fulfilled.

For the Spanish Government, it is an important endorsement that Brussels gives this approval just two days before the arrival of the mission of the European Parliament in Spain to analyze the deployment of the Recovery plan. The trip of the European parliamentarians -who are mostly Spanish- is viewed with suspicion by the Executive and the Socialists, who fear that it will become a throwing weapon for the conservatives (Spanish and continental), who whenever they can try to attack them for this flank.

The step taken this Friday consists, administratively, in the approval of the European Executive to the reforms and the goals committed by Spain in its recovery plan for this third payment. The evaluation now goes to the Council of the EU, that is, the member countries, which has two months to make observations if they consider it and, later, give permission to the Commission to finally make the payment.

This time was not the first time that Brussels has evaluated the control and audit system of the plan. It already did so in the first leg, at the end of 2021, but asked Spain to make adjustments. Specifically, he demanded an improvement in the collection of data on beneficiaries of these aids who are owners of foreign companies, as well as internal reinforcement of access to information to avoid conflicts of interest.

This milestone —as the commitments assumed by the Member States to access aid are known in technical jargon— came under the spotlight last October, after the Bloomberg news agency published that Spain risked losing money from the fund due to the risk of not having it ready on time. Brussels has ended up positively evaluating how Spain has continued to develop the fund supervision mechanism.

Among the improvements analyzed, it is included that the Tax Agency has signed three agreements with notaries, property registrars and the Ministry of Justice has adopted a protocol to collect information on foreign companies. At the same time, a ministerial order has been issued that gives powers to request relevant data from foreign authorities and internal control procedures have been reinforced. In addition, the Government has developed a new IT tool to review ex ante the risks of conflicts of interest. With these actions, the Commission considers the improvements that it demanded to have been fulfilled and which it will not follow up on. In other words, Brussels will not carry out another evaluation coupled with the release of future funds that analyzes whether the improvements have been implemented correctly.

Both the European Commissioner for the Economy, Paolo Gentiloni, and the Spanish Minister and First Vice-President, Nadia Calviño, had announced that the funds for the third disbursement would arrive “in the coming days.” “We are working intensively, as always, with the Spanish authorities, who have had the privilege, but also the responsibility, of being pioneers in the Recovery and Resilience Plan process,” said the Italian on Monday. In fact, Spain has been the first country to request the unlocking of the third tranche, along with Italy, and will be the first to receive the money on March 28.

Committed reforms

Beyond this problem with the control system, which has already been resolved, compliance with commitments and receipt of funds has gone practically as planned. Spain surpassed, even with a note, the demand for a labor reform that would reduce temporary employment, which was presumed to be one of the great obstacles of the plan. Now comes another of those big obstacles to jump, the pension reform, which will be evaluated in its entirety in the fourth payment and has not yet been approved. The Social Security negotiations with social agents, political groups and Brussels have not concluded. Much of what happens from now on with the plan depends on its result.

The recovery fund, designed to mitigate the impact of covid-19, is an unprecedented mechanism to support economic and social growth in member countries that the EU has never experienced before. It is a breath of fresh air in the form of transfers -as well as an additional package of loans-, in exchange for some extensive reforms that Brussels is evaluating before and after execution.

Spain is one of the countries that will receive the most money from this new scheme, for having been one of the most affected by the pandemic, and it was the first country of the club to request this third disbursement in November. The first transfer, paid in 2021 by the community Executive, was a pre-financing that was delivered for approving the recovery plan. The first official payment, of 10,000 million, was released after meeting 52 milestones, among which were reforms already underway such as the rider law or the minimum vital income.

The second disbursement, the most enormous —12,000 million euros—, was coupled with a set of 40 objectives that included relevant changes, such as the labor reform or the first part of the pension reform. This last package has aroused misgivings within the European Commission, which gave the green light to the payment, but expressed doubts especially about the new Intergenerational Equity Mechanism (MEI).

This third section was accompanied by 24 milestones and 5 objectives, carried out in 2022, which the Commission evaluated for three months —one more than usual. In addition to the audit system, the Government promised to approve the reform of the bankruptcy law, the law relating to the Comprehensive Vocational Training System and the reform of the social contribution system for the self-employed, which implies a gradual change so that these are gradually approaching to actual income; advances in R+D+i projects in the automotive sector; investments in the fishing sector; measures to expand the scope of the minimum vital income and investments in culture.

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