Tensions rise in Spain over use of €140 billion in EU recovery funds

The Spanish government is increasingly under fire over its use of the European Union's massive economic recovery funds, with critics blasting the distribution of aid as too slow and arbitrary.

Spain's Prime Minister Pedro Sanchez presents a graph during an end-of-year press conference at La Moncloa Palace in Madrid, on December 29, 2021. (Photo by JAVIER SORIANO / AFP)
Spain's Prime Minister Pedro Sánchez presents a graph during an end-of-year press conference at La Moncloa Palace in Madrid, on December 29, 2021. (Photo by JAVIER SORIANO / AFP)

Spain is due to receive €140 billion ($160 billion) from the fund by 2026, half of it in grants, making it the programme’s second-biggest beneficiary after Italy.

The landmark €800-billion recovery plan was approved by Brussels in July 2020 to help the bloc rebound 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 Sánchez said earlier this month, calling the funds “a historic opportunity for Spain”.

Spain and Portugal were the first nations to receive money, with Madrid collecting €19 billion during the second half of 2021.

The funds are at the heart of the economic and political strategy of Sánchez’s government after the economy contracted by a whopping 10.8 percent in 2020 under its watch as the pandemic hit.

The government faces elections by the end of 2023.

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

 ‘Lack of leadership’

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

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

This is “very far from the targets” that were set and the delay in using the aid will hamper growth, think-tank Funcas has warned.

Aerospace giant Airbus complained of a lag in the allotment of the funds, citing a “lack of coordination and leadership” from the responsible ministries, according to an internal memo published in El País newspaper last month.

Critics also say that even when the money is distributed, it is often not well spent, with small amounts spread across many projects.

“The current assignment system for the funds” leads to their “dispersion” and favours “little projects”, some of them “a bit odd,” said the Exceltur tourism association’s vice president, José Luis Zoreda.

He cited as an example a golf course in the rainy northern region of Asturias.

To have a “real impact”, the funds should focus on “a few large projects” with a strong potential to “transform” the Spanish economy, he added.

‘Cruising speed’

The row has in recent days become political, with the right-wing opposition Popular Party (PP) accusing the government of favouring regions and municipalities run by the left.

“Two years ago we proposed setting up an independent agency for managing EU funds” as happened in Greece, Italy and France, PP leader Pablo Casado said.

“But Sánchez preferred to distribute aid arbitrarily,” he charged.

Casado and several right-wing regional leaders have threatened to take the government to court over the distribution of the EU money, accusing it of “favouritism”.

But Sánchez quickly hit back.

“Let’s not turn the European funds into a partisan question… which is what the opposition wants,” Sánchez said Monday during a news conference with visiting German Chancellor Olaf Scholz.

Economy Minister Nadia Calviño, who served as director general in charge of the EU budget from 2014 to 2018, dismissed the PP’s criticisms as “not relevant”.

The deployment of European funds will achieve its “cruising speed” in 2022, she added.

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Spain’s PP is hot on the heels of PSOE, but will they need Vox to govern?

With the next general election slated for December 2023, recent polling shows Spain's Conservatives gaining ground on the Socialists. Spanish political correspondent Conor Faulkner looks at whether the PP will need far-right Vox to govern, as they now do at a regional level.

Spain's PP is hot on the heels of PSOE, but will they need Vox to govern?

Recent polling from Spain’s CIS (Centre for Sociological Research) shows the incumbent PSOE-led government with a slight, but shrinking, advantage over opposition parties.

On 30.3 percent, Pedro Sánchez’s PSOE would form the government if elections were held today, but that score is unimproved since April and, crucially, the centre-right party Popular Party is gaining, polling at 28.7 percent in May, with the difference between the two now only 1.6 percent.

In fact, PP have been on a steady rise since a turbulent start to 2022 in which former leader Pablo Casado was forced to resign after becoming entangled in intra-party infighting with PP’s regional President in Madrid, Isabel Ayuso.

Casado was replaced by Galician Alberto Núñez Feijóo, considered to be a more traditional centre-right candidate in the mould of Rajoy, who served as President of Galicia between 2009-2022.

PROFILE: Feijóo, steady hand on the tiller for Spain’s opposition party

Whereas Casado was often drawn into scandal and outflanked on cultural issues by far-right Vox, Feijóo is considered a more conventional conservative less prone to populism, and his short tenure as leader has put the PP back on the road to electoral respectability. 

PP were polling around 21 percent in February, amid the public infighting, but since then have steadily risen to the 28.7 percent that they would get if an election were held today, according to recent CIS numbers.

Yet, while many view Feijóo as more centrist than his predecessor, at the regional level far-right Vox have entered into a regional government coalition with PP in Castilla y León.

With important regional elections looming in Andalusia in June, and a general election further down the line in December 2023, it remains unclear if PP would be forced to rely on Vox to overcome PSOE’s thin polling advantage and form a national government.

Crucially, PP’s recent rise has not chipped away at Vox’s polling numbers. According to the CIS, Vox’s polling numbers grew from 14.8 percent in April to 16.6 percent in May, and with centrist Cuidadanos all but electorally wiped out, hovering around 2 or 3 percent all year, and the far-left, junior coalition partner Podemos falling further in the polls, to below 10 percent, the CIS estimate a higher probability of a right-wing PP-Vox (45 percent) than they do a PSOE-Podemos (39.9 percent) government.

With Vox now firmly established as Spain’s third political party and already on the offensive in Castilla y Leon’s regional government – including its Minister of Industry, Commerce and Employment in the assembly recently declaring war against “the virus of communism” – all eyes will be on the upcoming Andalusian regional elections to see if PP is again forced to rely on Vox members to form a government.

Vox’s anti-immigrant, anti-Islam, climate-sceptic populist policy programme is controversial, and the prospect of them as junior coalition partner in a national government would be an abrupt change from a government that wants to introduce menstrual leave and provide financial aid to renters.

Their entry into government at the regional level in Castilla y León was the first time they have officially entered into an executive, at any level, although PP have relied on Vox votes in regional assemblies in both Murcia and Andalusia in the past.

READ ALSO: Spanish cabinet approves paid ‘menstrual leave’

Whereas under Casado’s leadership PP were often forced rightward on cultural issues in an effort to stop Vox shaving away at their core electoral base, under Feijóo the future is less clear. Although Feijóo is considered more centrist than his predecessor, Vox’s steady rise since its emergence into Spanish politics since 2014 worries many on the left and centre, particularly as it has now officially entered into government at the regional level.

Yet, Feijóo seems keen to draw some distinction between the two parties. “The leaders of Vox cannot prove experience in management [of the country] because they do not have it, [and] it seems that they do not like the European Union… the State of Autonomies does not satisfy them either,” he said this week, but did recognise their electoral gains as “obvious.”

“The difference between Vox and the PP,” he continued, “is that a good part of Vox leaders came from the PP and left the common home.”

“We are very interested in those votes that those leaders have because they were votes that the PP had. And, as you will understand, we are here to win,” he added.

What exactly that means for the future political makeup of La Moncloa – whether Feijóo intends to win back those votes for PP or keep them in the ‘common home’ and work with Vox in coalition – remains unclear.

With the Sánchez-led coalition having had almost its entire term swallowed up by the global pandemic, then war in Europe, and now a cost of living and inflation crisis, it seems likely the left could lose the next general election and the Spanish right will return to power.

What remains to be seen, however, is whether that means a PP government or a PP-Vox coalition and the prospect of the far-right in government. All eyes will be on Andalusia in June to see how Feijóo pivots his party as it looks ahead to general elections next year. 

READ ALSO: What a Vox government could mean for foreigners in Spain