The Government starts the second phase of the European recovery funds by activating 50,000 million soft loans
The Government has flipped the switch that The second phase of the recovery plan begins, a stage in which Spain will be able to mobilize up to 83 billion euros in cheap loans financed by the EU. The Ministry of Economy signed this Monday an agreement with the Official Credit Institute (ICO) to activate 30,000 million euros in green investments and for the growth of SMEs. A figure that is added to the 20,000 million that already began to move last week for projects managed by the autonomous communities, with a first round of 3,400 million.
For the Minister of Economy, Carlos Body, it is a “good initial push for the second phase of the plan” which will allow “maximizing” the impact of the arrival of investments in strategic sectors. This ‘part B’ of the plan is not as advantageous as the first – in which money was provided as a non-refundable loan – but the Executive trusts that it will also be able to mobilize green investments, in housing, digital transformation or for the growth of SMEs.
The financing that was activated this Monday after the signing of the agreement with the ICO is divided into two funds. The first of them is equipped with 22 billion euros for investments to combat climate change. In this section, companies and households will be able to request loans for projects in areas such as sustainable transportation, energy efficiency or renewable energy.
To give an example, a hotel businessman could request a loan to change the refrigerating chambers of his restaurant for more energy efficient ones. Or a company could propose a project to buy electric vehicles or install charging points or photovoltaic panels. In the case of households, they will be able to resort to ‘cheap’ loans to purchase an electric vehicle or to improve the energy efficiency of your home.
The second fund that activates the ICO this Monday will finance investments that enhance the growth of SMEs. For this, they are made available to companies 8,150 million euros in loans that make it easier for small and medium-sized companies to increase their size. In this section, banks will play a key role in selecting projects and will assume the risk. The Government has reserved 1,000 million for tourism SME projects and 150 million for the Perte of co-official languages.
In both cases, two types of projects can be formalized. The first can reach up to a maximum of 10 million euros budget and are designed for SMEs and they will be financed mainly by credit institutions. That is, you will have to go to the bank window to request them.
The most voluminous investments that exceed that amount fit the profile of large companies or public administrations where the ICO can participate through direct financing and other instruments such as the purchase of bonds or entry into capital. In any case, Economía calculates that 70% of the 30,000 million that are now being mobilized will be channeled through the banks.
ICO sources state that the loans will act as a “stability network” and will provide financial security thanks to their advantageous conditions. These conditions translate into lower interest rates than the Spanish Treasury could achieve on its own and with longer repayment terms, with the possibility of introducing grace periods. The same sources estimate that a loan financed with European money can represent a saving of 8% compared to a loan for a similar investment outside the recovery plan.
Doubts about appetite for loans
Although the potential for mobilizing funds is even somewhat greater than in the first, There are great doubts that demand will be similar. Although the volume of financing is higher than that of the lost fund aid, these are loans that must be returned and that, in the event that the investments are executed by administrations, count towards the deficit and debt.
Furthermore, the financial conditions that currently exist, with official interest rates that are close to historical highs, are very different from the zero rates that were recorded when the program was designed. The sharp rise in financing costs in general makes these soft loans less attractive. which, although they have more favorable conditions, are also affected by the general increase in the cost of financing.
Added to this situation is the important bureaucratic burden and complexity that European funds bring with them. Two factors to which the tight deadlines are also added. The fund regulations require that all spending be committed before August 2026, and the loan section has only just begun to operate, so there are only two years left. This last point has aroused criticism from several regional governments, both due to the tight deadlines and the lack of collaboration with the communities when designing the fund.
