Brussels approves the fourth payment of 10,000 million European funds to Spain, but deducts 158 million for failing to meet an objective
The European Commission approved this Wednesday the disbursement of the fourth tranche of European recovery funds, endowed with 10,000 million euros. Brussels has given the official green light (the unofficial one has been known for a long time) to important milestones such as the pension reform, the housing law or the unemployment benefit reform. The latter caused the Commission’s opinion to be delayed two months with respect to the initial deadline to give more time for the Government to put forward a new text.
However, the news has come with a bitter tone for the Government. Spain will not receive the full 10,000 million as it was provided. The European Commission will freeze 158 million euros because the Government has not met on time one of the 61 milestones and objectives that had to be evaluated in this fourth tranche.
This is not the first time that Brussels has frozen part of a disbursement to a Member State. It already happened with Portugal, Lithuania or Romania. However, Yes, it is the first time that Spain does not arrive on time with a reform proposed in the plan and is penalized. The other five previous payments (including pre-financing and RepowerEU) were disbursed in full.
Receiving a partial payment is a small symbolic setback for the Government, which boasts since the launch of the plan that Spain is at the forefront in execution and receipt of funds. However, in monetary terms the impact is small. These 158 million barely represent 1% of the total allocation of this fourth tranche of European aid and 0.2% of the 80,000 million euros in non-refundable transfers that Spain has allocated until 2026. The penalty would have been greater if it had been failed to meet a milestone such as the reform of unemployment benefits, which has more weight in the evaluation.
Furthermore, it must be taken into account that Those 158 million do not have to be lost. When Spain proves that it has met its missing objective, the EU can unblock the money. Something that the Executive estimates will happen “in the coming months.”
While waiting for the final payment to be authorized, Spain has already received nearly 48 billion euros in non-refundable aid, just over half of the provision planned for the country. Body has highlighted that Spain is the only EU country along with Italy, Croatia and Portugal that has obtained the most disbursements and the second by amount only after France.
The culprit: Kit Consulting
The milestone that the Government has not been able to meet is related to the Agents of Change program, an initiative to help the digitalization of SMEs. The Executive has been forced to reformulate it due to low demand and has renamed it Kit Consulting, which must support at least 15,000 SMEs to digitally transform before December 2025.
The problem is that the changes have not arrived in time to avoid a freeze of European money. The Minister of Economy, Carlos Body, has indicated that the Government now has seven months to prove that the reform has been completed. “There was no point in continuing to wait a few more months for full payment. In the coming months the 158 million will be added.”Body commented in a press conference held this Wednesday.
The minister himself has indicated that there is a possibility of minor freezing If before the final disbursement arrives – which will still take a few weeks – the Commission reduces the penalty considering that progress has already been made in this regard. For now, the Government has already opened the registration period to benefit from the Consulting Kit, which will begin to be available on June 18.
Body considers tax reform settled
One of the most notable issues that Minister Body has been asked about in the press conference he gave to announce the approval of the fourth disbursement is tax reform. The Government agreed with Brussels on a tax reform prepared following the guidelines of a ‘council of wise men’. Part of the 7.5 billion euros of the fifth tranche of aid depends on it. However, the experts’ conclusions were published days after the Russian invasion of Ukraine, making the text a dead letter.
The Government has insisted throughout this time that the tax measures it has adopted in recent years—among them, the three special taxes on banks—will be sufficient. But as the time to request the fifth payment approaches, The Executive has reinforced the message that enough has already been done.
“There have been great efforts. “We have tax revenues over GDP well above 2021 levels.”, has expressed the Minister of Economy. “We believe that ambitious measures have already been taken that are being reflected in this structural increase in the ratio of income to GDP,” he added.
