MNI: Spain Unable To Spend All EUR163 Bln Under NGEU - Sources

The Spanish government recognises that it will be unable to spend all of the EUR163 billion allotted to it under NextGenerationEU, and will prioritise grants while leaving loans on the backburner in its revision of the programme to be submitted to the European Commission in November, two sources familiar with the matter told MNI.

With only EUR72 billion so far disbursed under NGEU and only half of the reforms and other milestones promised to Brussels achieved, the government has struggled to find projects on which to use money from the EU’s post-Covid recovery programme, the sources said. The government is unsure whether it will be able to pass all of the remaining reforms required to access remaining funds given its flimsy majority in parliament, they added. (See MNI: Italy Looks For Ways To Spend NGEU Money -Officials)

With an Aug 31 2026 deadline for member states to make their last disbursement request and only until the end of this year to modify NGEU plans, Spain has so far received EUR55 billion in NGEU grants and EUR16 billion in loans, government data shows.

NGEU LOANS NOT MUCH CHEAPER

Madrid is working with Brussels to reduce the number of projects that NGEU is set to finance and for ways to speed up the use of funds after disbursement, the sources said, without providing any estimate for the total amount of money Spain is ultimately likely to receive under the programme. But Prime Minister Pedro Sanchez’s administration is resigned to losing a large portion of its NGEU loans, they said, noting that it would make little sense to add debt which would have been only slightly cheaper than the government’s own borrowing and then to spend it on hastily-assembled projects.

The revised plan will see greater emphasis on relending NGEU money for projects under the green transition or in other strategic areas run by private companies which will have to repay the money, a source said. The funding to private enterprise will be provided at rates only “marginally” higher than Spain pays to Brussels, he said.

The revision will also take greater advantage of rules allowing money to be spent beyond the 2026 deadline if it is handed over to state-owned companies for use on projects which are already underway and which are not subject to future political interference. Spain was the first country to obtain NGEU extensions in this way, a source noted.

FROM LEADER TO LAGGARD

In recent years Spain has slipped from being a leader to laggard in NGEU progress, with an Oct 8 European Commission document pointing to at least 10 member states with a better pace of implementation.

The document also singled out Spain as the first member state to be told to lose NGEU money previously granted after backtracking on a target which had initially been judged to have been achieved. The reversal of a milestone linked to reforms of temporary civil service employment led to EUR626.6 million being deducted from the last payment Spain received in August. Another EUR500 million was suspended from the last payment to the country in connection with failed milestones for tax reform and digitalisation of regional and local entities.

Spain’s NGEU progress on reforms and targets has been stymied by the Socialist government’s inability to reliably pass legislation, including its failure to approve a new budget since 2022, though it has been able to spend funds once disbursed, one of the sources said.

Madrid has received five payments from NGEU, which can make up to two disbursements a year, while Italy, the other big recipient of the plan, got its seventh payment in August.

(With additional reporting by David Thomas in Brussels)