Critics fear historic stimulus aid will hit ‘real economy’

Spain’s King Felipe VI (saluting), Queen Letizia (2nd from right) and their daughters Spain’s Crown Princess Leonor and Princess Sofia attend the Spanish National Day ceremony at the Royal Palace in Madrid. It comes after the Spanish government declared a state of emergency in Madrid in an attempt to halt the spread of coronavirus in one of Europe’s biggest outbreaks. Photo: AFP

The Spanish government has come under increasing criticism for its use of massive European Union economic stimulus funds, with critics calling the aid distribution too slow and arbitrary.

Spain is set to receive 140 billion euros ($160 billion) from the fund by 2026, half of it in grants, making it the second-largest beneficiary of the program after Italy.

The landmark €800 billion stimulus package was approved by Brussels in July 2020 to help the bloc recover from the impact of the COVID-19 pandemic and make its economy greener and more digitalised.

“We are talking about extraordinary amounts,” Socialist Prime Minister Pedro Sanchez said earlier in January, calling the funds “a historic opportunity for Spain.”

Spain and Portugal were the first nations to receive the money, with Madrid raising 19 billion euros in the second half of 2021. The funds are at the heart of Sanchez’s government’s economic and political strategy after the economy contracted by 10.8% in 2020. under his watch when the pandemic hit.

The government faces elections by the end of 2023.

But some business leaders and opposition parties have complained of a lack of coordination between the central government and powerful regions in Spain over the deployment of the money.

Although Spain was the first to receive aid, the money has “not flowed” into the “real economy” as quickly as expected, employers’ association CEOE said in a report in early January.

By the end of the year, only 38% of the funds allocated to Spain for 2021 had been used, according to official figures.

This is “a long way off the targets” that have been set and the delay in using aid will hamper growth, think tank Funcas has warned. Aerospace giant Airbus complained of a delay in allocating the funds, citing a “lack of coordination and leadership” from the responsible ministries, according to an internal memo published in the El Pais newspaper in December.

Critics also say that even when the money is distributed, it is often poorly spent, with small amounts spread across many projects.

“The current system of allocating funds” leads to their “dispersion” and favors “small projects”, some of which are “a bit bizarre”, said the vice-president of the tourist association Exceltur, Jose Luis Zoreda.

He cited as an example a golf course in the rainy region of northern Asturias. To have a “real impact”, the funds must focus on “a few large projects” with high potential to “transform” the Spanish economy, he added. The row has turned political in recent days, with the right-wing opposition People’s Party (PP) accusing the government of favoring left-leaning regions and municipalities.

“Two years ago we proposed to create an independent agency to manage EU funds,” as happened in Greece, Italy and France, said PP leader Pablo Casado.

“But Sanchez preferred to distribute aid arbitrarily,” he charged. Casado and several right-wing regional leaders have threatened to sue the government over the distribution of EU money, accusing it of “favoritism”.

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