Spain rejects criticism over slow spending of EU recovery funds

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Spain has brushed off corporate concerns about its management of billions of euros of EU recovery funds, insisting it has reached cruising speed in developing investment plans and would meet strict audit standards to secure its next batch of money.

The country was the first to receive a payment from the EUs pandemic recovery funds last year and is due to receive a total of 140bn, making it the blocs second biggest recipient after Italy. But Spains experience has been rocky, highlighting the uphill task countries face in managing the 800bn programme, which aims to repair damage inflicted by Covid-19 and make economies greener.

In recent weeks Spains Socialist-led government has faced dissatisfied business partners including Volkswagen, an ally on electric vehicle projects and questions over the pace and transparency of fund distribution.

But Nadia Calvio, Spains deputy prime minister and economy minister, insisted its plans were on track and dismissed complaints that funds were being doled out too slowly.

We have reached cruising speed. There are calls and tenders for projects being opened by the public sector at a rhythm of around 2bn a month, she said in an interview. With the recovery plan, the aim is not to be very fast, but rather to have a constant rhythm that maintains strong investment in the coming years.

The so-called Next Generation EU funds, which comprised roughly 70bn in non-refundable grants and 70bn in loans for Spain, are being directed to projects ranging from residential solar panels to online stores for small businesses.

The European Commission said: The implementation of the Spanish plan is currently in line with the agreed timetable, laid out in the [decision] approving the plan.

But some business executives accuse Spain of blurring the picture with its figures, arguing that the pace at which it opens tenders for project bids the metric highlighted by the minister is not the best gauge of performance or economic impact.

Nadia Calvino, second left, with fellow ministers from Luxembourg, Estonia and Finland at a meeting of European finance ministers in Brussels this week Olivier Hoslet/EPA-EFE/Shutterstock

The Crculo de Empresarios, one of Spains biggest business lobbies, instead highlights actual payments to the regional and local governments and companies that will be spending the funds on approved projects.

That metric shows that only 22.3 per cent of the 28.4bn in EU grants that Spain had budgeted to use this year had been paid out by the end of September, according to data from the general comptroller of the state administration.

The general feeling in the private sector is that we are seeing poor management, said Manuel Prez-Sala Gozalo, chair of Crculo de Empresarios and managing partner of venture capital firm Grupo Perseo. Everything is delayed, there is a lot of bureaucracy, there is little clarity.

Last month the finance ministry official running the recovery funds programme, Roco Frutos, left her post for personal reasons.

Highlighting one bottleneck, an official at another ministry administering some of the money said: We just dont have enough people with experience of managing funds.

Rodrigo Ogea, co-managing partner in Spain of the law firm Baker McKenzie, said Madrid should have outsourced the handling of fund applications to the private sector. The central government has to roll out a huge amount of money in a short period of time and doesnt have the operating capacity to do it, he said.

The government has also been shaken by uncertainty over one of its landmark projects an initiative led by Volkswagen-owned Seat to build a new car battery plant in Valencia and upgrade two existing factories to make electric vehicles.

Last week Wayne Griffiths, Seat chief executive, said the public money on offer was not sufficient, even after the government increased the sum to 397mn of grants and loans. He said the company was looking for solutions to ensure the project goes ahead.

Calvio declined to comment on the company, but said she would strongly confirm the commitment of the Spanish government to accompany and support the necessary investment in technology.

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Spain has already received 31bn of the recovery fund grants it is due from Brussels. Countries get the money by completing a series of structural reforms, such as Spains new labor law approved earlier this year.

Calvio said she has been finalizing the details for Spains application for the next 6bn tranche.

One condition has been in the spotlight: Spains need to finish setting up a new audit system to monitor targets and payments.

Monika Hohlmeier, the conservative chair of the European parliaments budget control committee, has criticized both Spain and the European Commission for opacity. What we ask is where did the money actually go? For what measures did Spain spend the money? she told a hearing last month.

Calvio said Spain was engaged in very intense work with the commission to ensure it had financial controls that met the highest standards.

The commission is extremely demanding, as it should be, she said. Whatever country you talk to theyre going to tell you the same. This is not specific to Spain.

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