Pablo R. SuanzesCorrespondent, Brussels
Brussels Correspondent
Updated Monday,15January2024-19:29
The Government of Spain does not want a partial payment of European funds. Last December, half a year late because the call for early elections prevented the completion of a series of reforms, the then vice-president Nadia Calviño sent Brussels a request for the fourth disbursement of the Next Generation, which represents 10,000 million euros. But in order for the European Commission to give the green light and then Ecofin to ratify the decision, all the requirements need to be met, in the form of investments, milestones and reforms. And this time there is one, an important one, that has not come out and it is not clear how it will be able to come out, after Congress rejected last week to extend the decree for the reform of unemployment benefits.
Formally it's not a big problem, but politically it is and all parties know it. The system is designed so that each disbursement is linked to a series of requirements, but there is the option of it being partial instead of complete, and there is even an agreed formula to 'deduct' the amount depending on the pending milestone and its importance. And in practical terms, the EU doesn't care whether a specific thing like that subsidy is put in place now or in a few months. But the political stigma is there and no one, least of all Pedro Sánchez, wants to be singled out for being incapable of pushing through a reform, the first to receive a kind of consolation prize.
For this reason, the new Minister of Economy, Carlos Cuerpo, met this Monday in Brussels with Vice-President Valdis Dombrovskis and the Commissioner for Economic Affairs, Paolo Gentiloni, taking advantage of his first participation in the Eurogroup. "We are in discussions with the Commission related to meeting the milestones and objectives of this disbursement, which are more than 60. We are working in parallel at the domestic level to continue making progress on the milestones and objectives that remain to be met. These two negotiations have to continue in parallel in order to continue to have that signal of confidence and those flows that reach the Spanish economy," said Cuerpo.
In strict accordance with the protocol, the European Commission has two months to analyse a request for disbursement and make a decision, but it has already been established by reiteration that if a request arrives before Christmas or the summer break, an additional month is added. So the Commission has until the end of March to make a decision.
At that time, and if there is no news about unemployment benefit, there are different possibilities. The first is for the Commission to say that there is no possible fix and there must be a somewhat smaller outlay, and the outstanding amount would be paid once the requirements have been satisfied. The second, more complicated, but negotiable in any case, is for the Commission to simply give the go-ahead to the full disbursement, even in the absence of such approval, hoping that it will be a matter of weeks to resolve it. In the past, it happened with our country with a component of an audit mechanism. This has more political sensitivity, but if Cuerpo manages to convince the commissioners, it is a possibility, albeit a remote one.
The third and main one is to 'stop the clock' for as long as possible, a few more months, as already happened in 2023 with Italy in a more complicated circumstance, since not only did it have pending milestones, but it was trying to amend its plan and get reforms out of certain disbursements to postpone them. In this way, Spain would gain a little more leeway to try to resolve the issue. That is the only plan right now, to take advantage of all the existing flexibility in the system, but it will depend on the negotiation in Spain, on whether there are real options to achieve reform in a reasonable time.
In his message on Monday, the new minister, whose main responsibility in Brussels is to maintain the path of communication opened by Nadia Calviño, but with fewer contacts than she generated after decades working for the Commission itself and perhaps a more complicated situation from a technical point of view with the return of fiscal rules, He has come to say that they will try to solve everything at once. He hasn't been explicit, he hasn't ruled out or confirmed anything, and he's put everything in the back of the conversations. But if his task is clear, and the urgency as well, no less the consequences of a second setback in the country that boasted of being at the forefront on the whole issue of funds and can no longer do so. Use flexibility but don't hit the brakes.