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Brussels will sign its first national recovery plan. It hopes to revive the European economy hit by the pandemic. Officials are preparing to approve historic spending proposals in Spain and Portugal on Wednesday.
800 billion euros Next Generation EU Funds agreed last year bet that large-scale spending on priorities such as energy transition and digitalization can prevent the European Union from repeating the consequences of the 2008 global financial crisis, when its recovery lags behind that of the United States.
The fate of the plan will largely depend on the performance of the big beneficiaries, such as Spain, Due to the Covid-19 crisis, suffered the worst recession last year. The Spanish economy has contracted by 10.8% in 2020, and it is expected to receive approximately 70 billion euros in grants and 70 billion euros in loans during the 2021-2026 period of the plan. Portugal is expected to receive 14 billion euros in grants and 2.6 billion euros in loans.
Italy It will become the biggest beneficiary of the Next Generation Fund. It is expected that the European Commission will sign 191.5 billion euros in loans and grants in the next few days.
As a condition for obtaining this funding, all national plans must stipulate how to use EU funds to promote digitization and reduce carbon emissions within the EU, while also promising member states to carry out far-reaching reforms. Observers warned that pushing the plan to pass will test member states.
“Implementation is the key,” said Guntram Wolf, director of the Bruegel think tank. He said that many of the recovery plans developed by EU countries are impressive, but he warned: “In the final analysis, you have to put them in place, which means overcoming some domestic resistance. This is the challenge.”
As Brussels signs the proposal in the coming weeks, European Commission President Ursula von der Lein will travel to Lisbon and Madrid on Wednesday to celebrate their plans to be approved in a series of EU capital visits. This summer, EU member states will give final support.
The European Commission predicts that after the single currency zone output fell by 6.6% in 2020, all euro zone member states will resume their pre-crisis output levels by the end of next year, thanks to recovery spending.
But Madrid’s recovery plan has caused great controversy in Spain. The Prime Minister of the minority government led by the Socialist Party, Pedro Sánchez (Pedro Sánchez), has been defeated in public opinion polls. He hopes that through the combination of funding and reforms, 800,000 jobs will be created, which will average domestically during the implementation of the plan. The GDP increased by 2 percentage points. He compared the impact of the transition with Spain’s accession to the European Community and the creation of the EU single market.
Spain’s Deputy Prime Minister Carmen Calvo (left) stated that EU funding will make Spain “a super modern country” © Juan Carlos Hidalgo/EPA-EFE/Shutterstock
“We will be able to position our country in terms of development and competitiveness. It is already the fourth largest economy in the EU… an ultra-modern country,” Carmen CalvoThe Deputy Prime Minister told the Financial Times in a recent interview.
Madrid’s goals include 5G Internet coverage for 75% of Spaniards by 2025, 250,000 electric vehicles on the road by 2023, and 5 million by 2030.
The government is also seeking permission from EU state aid regulators to invest 3 billion to 4 billion euros in new projects. Battery factory To revitalize the automobile industry.
However, opponents accuse the government of excessively centralized control of EU funds and that the reform agenda is too cautious about some of Spain’s biggest structural challenges, including the pension system, fiscal deficits and a dysfunctional labor market.
Pablo Casado, the leader of the main center-right opposition People’s Party, recently told the Financial Times that the plan could lead to huge waste.
He said: “So far, any project that has not been funded by banks cannot be funded by European taxpayers.” “Companies are taking unprofitable projects out of the drawer.”
He said that Spain’s economic future does not lie in funding for projects such as battery factories, but “a problem of restructuring the national economy”.
The government stated that it has outlined 102 reforms in its recovery plan, but breakthroughs in pensions and labor markets depend on negotiations with companies and labor unions, and fiscal reforms must wait for expert reports in February next year.
Although Sanchez will lead the committee responsible for overseeing the development and implementation of the recovery plan, his government insists that many resources will be used by regional governments and other agencies.
According to the 70 billion euro grant proposed by Madrid, 40% of it will be used for energy transition and other green projects, 30% will be used for digitization, 10% will be used for education and training, and 7% will be used for research and development.
Fabian Zuleeg, chief executive of the European Policy Center think tank, questioned whether the EU’s response to the crisis would ultimately be adequate. But he said that the EU has taken collective measures to deal with the pandemic and has not repeated the grudging response to the economic crisis ten years ago, which is commendable.
“From the beginning there was a feeling that we need to solve this problem together,” he added.
Additional reporting by Peter Wise in Lisbon
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