Spain pushes ahead with recovery plan while waiting for EU funds

MADRID (Reuters) -Spain will press ahead with its economic recovery plan despite an expected delay to the arrival of European Union support funds, financing initial investments via government borrowing, Prime Minister Pedro Sanchez said on Tuesday.

FILE PHOTO: Spain's Prime Minister Pedro Sanchez holds a book of the economic recovery plan after the COVID-19 pandemic before a news conference at the Moncloa Palace in Madrid, Spain, April 13, 2021. REUTERS/Sergio Perez/Pool/File Photo

The budget passed by parliament in December earmarks 27 billion euros ($32.23 billion) in investment spending this year. Sanchez is due to present a broader recovery plan to parliament on Wednesday that foresees 72 billion euros of investment by the end of 2023.

“Whatever the EU’s delay, we have already allocated the resources for Spain,” Sanchez told a news conference on Tuesday after explaining the plan’s main lines.

The prime minister gave details of projects worth 50 billion euros, including 6.8 billion euros for housing reform and 13.2 billion euros in sustainable mobility, boosting the key automotive industry.

Spain is due to receive about 140 billion euros ($166 billion) from the EU to help it recover from the COVID-19 crisis. About half the funds will come in the form of grants and the rest will be loans.

But Germany’s constitutional court has blocked without a time-frame the ratification of legislation allowing the EU to conduct joint borrowing, delaying distribution of the funds.

Madrid will submit its investment plan to Brussels for approval by the end of April, Sanchez said, later than an earlier March deadline.

“There are still elements to fine-tune with the European Commission,” he told the news conference, without explaining which elements were dragging out the long back-and-forth with Brussels.

Although it intends to proceed with its spending plans, Spain now expects the money arriving at the end of the year. That will postpone the bulk of the economic impact to 2022 and the government last week downgraded its growth forecast for this year to 6.5% from 9.8%.

The European Union recovery funds will boost economic growth by 2 percentage points annually in the coming years, according to government calculations.

Spain will use the money to finance 110 major investment projects, Sanchez said, including nearly 8.3 billion euros for helping the public administration and small and medium-sized enterprises digitalize.

($1 = 0.8378 euros)

Reporting by Belén Carreño, Inti Landauro and Nathan Allen, Editing by Andrei Khalip and Catherine Evans