The European Commission approves the Addendum to the Recovery Plan, which will mobilise all the resources allocated to Spain from the NextGeneration EU funds

Once the Commission's approval has been received, the EU Council of Finance Ministers will have one month to ratify the decision.

The European Commission has positively assessed the Addendum to the Spanish Plan, pointing out that in particular "the plan makes it possible to face the new challenges" of the international and energy context, and underlining that it represents "an adequate and balanced response to the economic and social situation".

In total, the Recovery Plan will mobilise up to €163 billion in the period 2021-2026, more than 12% of Spain's GDP, in addition to the €36.7 billion from the Structural Funds of the multiannual financial framework 2021-2027 to complete an ambitious programme of investments to modernise the country.

The deployment of the Recovery Plan is proving to be decisive in the growth and structural change of the Spanish economy, favouring an increase of almost 5% in investment, especially related to the green and digital transition, increasing the productivity and competitiveness of Spanish companies, placing Spain at the forefront of digitalisation, boosting employment stability and increasing employment in high value-added sectors.

The European Commission has highlighted the potential of the Addendum to further boost economic growth in the coming years. In particular, it considers that through transfers and loans as a whole, "it has the potential to increase the level of Spain's GDP by between 2.7% and 3.5% by 2025", without explicitly including the positive impact of structural reforms. This recognises "the impact on growth potential, job creation and territorial and social cohesion".

These resources will be channelled through investments and reforms aimed at boosting strategic autonomy in the energy, agri-food, industrial, technological and digital fields, and housing stock for social or affordable rentals.

New disbursement schedule

With the approval of the Addendum and the consequent launch of the second phase of the Recovery Plan, the disbursement schedule, including additional transfers and loans, as well as the associated milestones and targets, is updated to maintain the pace of investment in the coming years.

With the new schedule, Spain will be able to receive seven upcoming disbursements and a pre-financing of some 1.4 billion associated with the REPowerEU chapter. To this effect, between transfers and loans it could receive up to €25.6 billion in 2024, up to €44.6 billion in 2025 and up to €44.3 billion in 2026.

To maximise the transformative potential of the Addendum, the design and implementation of the instruments for the management of the new funds will start immediately.

Investments to boost strategic autonomy

The more than €10 billion of the additional transfers and part of the loans will be used to reinforce almost all the PERTEs already in place to mobilise and channel public and private investment towards the development of the Connected and Electric Vehicle value chain (PERTE VEC), Cutting-Edge Health, Renewable Energy, Green Hydrogen and Storage (PERTE ERHA), the Digitisation of the Water Cycle, the modernisation of the Agri-Food industries, Aerospace and the Decarbonisation of the Electro-intensive industries, the Circular Economy, the New Social and Care Economy, the semiconductor and microprocessor industry (PERTE CHIP) and the New Language Economy.

With the Addendum, the EERTEs will be endowed with almost €27 billion in additional resources from transfers, loans and the RepowerEU programme, which will allow for continuity and completion of the calls for aid, financing of incentives and additional investments.

The Addendum includes a new chapter for the financing of actions under the RepowerEU initiative, with nearly €7 billion of funding, of which nearly €4.2 billion are earmarked for the Renewable Energy, Renewable Hydrogen and Energy Storage (ERHA) EPRT.

The actions to reinforce PERTE ERHA will provide continuity to the very successful lines already deployed in the first phase of the plan, such as those aimed at promoting self-consumption and storage in the productive sectors and households, or at strengthening and developing energy communities.

Likewise, the commitment to renewable hydrogen is demonstrated by doubling the investment foreseen in the initial plan with the incorporation of an additional €1.6 billion for the development of the value chain, new pioneering projects, the creation of hydrogen valleys and support for Major Projects of Special European Interest (IPCEI).

In addition, this PERTE includes a new investment aimed at strengthening industrial capacity in the renewable energy value chain with €1 billion, and another investment of nearly €1 billion aimed at increasing the security and flexibility of the electricity system, promoting the introduction of renewables in the electricity system and developing decarbonisation projects, such as battery factories and hydrogen production projects.

The PERTE for industrial decarbonisation and the transformation of the electro- and gas-intensive industry will receive almost €3 billion in transfers and loans.

In addition, to boost the semiconductor and microprocessor industry, the PERTE Chip will be endowed with around €12 billion for the development of the industrial and knowledge ecosystem. The PERTE Chip mechanism, managed by SEPI, is already positioning Spain as a focus for attracting industrial investment in chip design and manufacturing.

The PERTE for the Digitalisation of the Water Cycle will have an additional €3.06 billion, due to its relevance for strategic autonomy with, among others, investments for the improvement of desalination capacity and efficiency in the Internal Basins of Catalonia (Tordera II and Foix) and in the Hydrographic Demarcation of the Andalusian Mediterranean Basins (Costa del Sol and Levante Almeriense).

The agri-food PERTE also includes €410 million to reinforce the modernisation of more than 160,000 hectares of irrigated land.

In the field of the PERTE de Salud de Vanguardia, the addendum foresees, among other actions, the implementation of a programme to support rare diseases such as ALS, endowed with €50 million and aimed at improving infrastructures, equipment and promoting the humanisation of care.

The loans will provide favourable financing for investments by private and public companies.

The approved Addendum includes the mobilisation of up to €83 billion in loans from the NextGenerationEU Funds available to Spain to finance investments by private and public companies through 12 funds and the PERTEs, thereby creating a safety net to maintain the strong pace of investment in the coming years.

Companies, public entities and autonomous communities will be able to access sustained financing at a lower interest rate than that obtained by the Treasury and long repayment periods, guaranteeing the maintenance of the flow of financing on good terms, a particularly important element in this context of rising interest rates.

All Community budget loans will have a 30-year maturity, with an initial 10-year grace period on principal repayments. The financial profile will lead to loans with an average maturity of 20 years, thus lengthening the average maturity of the Treasury's debt portfolio, which is close to 8 years.

The interest rate will depend primarily on the cost of funding associated with NextGenerationEU issues during the six-month period in which each loan disbursement is made. Loans will be channelled mainly through financial instruments and directed towards investment in projects that generate an economic return, seeking complementarity with private investment, which will mobilise additional resources.

The Official Credit Institute (ICO) will be the main manager of the loans, due to its experience in channelling resources to companies through the Spanish financial system. More specifically, almost €40 billion on concessional terms will be administered through five funds, mainly aimed at supporting the dual green and digital transition of companies, strengthening their competitiveness and contributing to access to new markets. Collaboration with financial institutions will be of great importance in the management of these funds, allowing access to loans for companies of all sizes and sectors of activity anywhere in Spain.

Specifically, the ICO will launch the ICO-Green Line, endowed with €22 to provide loans to households and private and public companies for investments that favour the green transition, such as the generation of renewable energy, energy efficiency and the circular economy.

It will also channel €8 billion through the new Línea ICO Empresas y Emprendedores, which will be used to finance investments in the business fabric under favourable conditions. These loans will allow companies to meet their financing needs and mitigate the potential effects of tighter credit conditions, while maintaining the flow of finance. It will also allow the development of alternative means of financing for SMEs, thereby facilitating the financing of their growth.

The tourism and audiovisual sectors, the scaling-up of start-ups and housing will benefit from financial support instruments.

Within the ICO Companies and Entrepreneurs line, the tourism sector will have a €1 billion compartment to carry out projects aimed at developing new products or services, new organisational processes and innovation that facilitate savings in the consumption of resources and less waste generation, as well as investments aimed at increasing the category of the establishment and improving the sustainability of the building.

In addition, a specific fund of €1.5 billion will be created to finance the plan "Spain AVS Hub", aimed at increasing production in Spain's audiovisual and video game sector by 30%.

Support for the business fabric is completed with the ICO Next-Tech Fund, with an allocation of €4 billion, to continue facilitating the growth of Spanish start-ups in disruptive technologies, promoting innovation and digitalisation.

€4 billion will be allocated to the fund, also managed by the ICO, aimed at increasing the stock of social and affordable rental housing.

The catalogue of funds to support productive investments is completed with the creation of a new fund, managed by COFIDES, to co-invest with institutional investors in large projects in Spain (FOCO Fund), in addition to those already created to support companies affected by COVID (SEPI's FASEE Fund and COFIDES' FONREC Fund).

The EIB will manage an investment fund for the autonomous communities.

In addition, the Autonomous Community Resilience Fund will be created, endowed with up to €20 billion for the financing of sustainable investment projects of the autonomous communities, which will be managed by the European Investment Bank Group (EIB). These investments may be made by private and public companies from all the autonomous communities in the sectors of social and affordable housing and urban regeneration; sustainable transport; industrial and SME competitiveness; research, development and innovation; sustainable tourism; care economy and water and waste management; and energy transition.

The EIB's management will make it possible to draw on the experience and know-how of the European institutions in financing the autonomous communities' investments, as well as to expand the EIB's financial capacity through EIB co-financing. With this fund, the favourable loan conditions are passed on to the projects of the autonomous communities and their enterprises, while the co-governance approach to the management of the Recovery Plan funds is also maintained.

New funds to invest in Cyber Resilience and Security

Last, the Addendum will provide €2.16 for a new Cyber Resilience and Security Instrument to finance the investments of the National Cybersecurity Plan and to facilitate the adaptation of public and private sector capabilities in security, defence, aeronautics and space in an environment of greater geopolitical complexity and growing cyberthreats and cyberattacks.

Completion of reforms

Together with the investments, the Addendum includes 17 reforms that complete the transformation of the economy already under way and consolidate the model of sustained and sustainable growth. These include nine new reforms, such as the National Strategy to Combat Desertification, the Strategy for Energy Efficiency in the State Roads Network, the revision of the Securities Market Law and the Law for the Protection of Consumers and Users in Situations of Economic Vulnerability, in addition to eight others that extend the existing ones, such as the creation of a sandbox and the reinforcement of transport infrastructures, a regulation against food waste, the law on the activities of Interest Groups and the Green Paper on Sustainable Finance, among others.

Update on milestones and targets

In line with the provisions of the Recovery and Resilience Mechanism regulation, the Addendum modifies the timing and definition of some milestones to ensure the use of all NextGenerationEU funds. This update makes it possible to incorporate objective changes in economic circumstances, such as the impact of international energy and raw material prices on production costs, and to extend some deadlines to adjust them to the time required to comply with public procurement requirements, thereby responding to the requests of the autonomous communities.

The European Commission has approved the updating of 69 milestones and targets while maintaining or even increasing the ambition of investments and reforms. This makes it possible, for example, to extend the range of application of the successful Digital Kit programme to finance the digitisation of SMEs with more than 49 employees.

Non official translation