Since the COVID-19 pandemic, the world has changed. The crisis had a huge impact globally and we are now facing a double challenge: economic recovery and making changes for a better future.
On 26th May 2020, the European Union agreed on an unprecedented Recovery Plan to make tomorrow’s Europe more modern, more sustainable and more resilient. The result was that €750 billion is to be invested by 2027.
Europe’s most ambitious Recovery Plan
Next Generation EU (NGEU) is the name given to the Recovery Fund created to boost the entire euro zone. If we add the NGEU and the EU’s long-term budget (Structural Funds) together, it is the largest financial stimulus package ever undertaken by the EU, amounting to a total of 1.8 trillion euros.
Like the Marshall Plan 2.0, Europe is seeking to emerge from the pandemic by being greener, more digital and resilient, solving its current problems and being better prepared to face an uncertain future.
What is Next Generation EU?
As mentioned in the previous point, the European Recovery Plan, known as Next Generation EU, is a temporary initiative for 2021 – 2027 that was created to repair the damage caused by the pandemic. It amounts to 750,000 million euros, of which Spain will receive approximately 150,000 million euros in direct aid and loans.
The 3 pillars of the Next Generation EU
The objective of the NGEU is twofold: to promote recovery and at the same time transform Europe so it is ready to face future challenges. The objectives are defined in the following 3 pillars, which specify how the funds will be invested:
Helping Member States to recover through the new Recovery and Resilience Mechanism (RRM), mentioned below.
Relaunch the EU economy by incentivising private investments (companies and SMEs).
Apply the lessons learned during the crisis; boosting new programmes in health, civil protection, research, etc.
The €750 billion funds of this Recovery Plan for Europe (Next Generation EU) are divided between the European Recovery and Resilience Mechanism and the Recovery Assistance for Cohesion and Territories of Europe.
European Recovery and Resilience Mechanism (ERM)
The RRM is the centrepiece of the NGEU, with €672.5 billion in loans and grants. Its objective is to mitigate the economic and social impact of the pandemic and make European economies more sustainable, digital and resilient. The term ‘resilience’ is reiterated throughout the documents, reinforcing the idea of being better prepared for the future.
Of this sum, Spain will receive more than 60 billion euros in non-refundable transfers and could access up to 80 billion euros in loans.
Recovery Assistance for Europe’s Territories and Cohesion (React-EU)
The rest of the investment (around 47.5 billion euros) is allocated to this fund, which is more structural in nature but more agile and flexible in terms of implementation. React-EU will give Spain some 12.4 billion euros, which will be allocated mainly to the health and education sectors.
National Recovery, Transformation and Resilience Plan for Spain
Of all the possibilities offered by the Recovery Plan for our companies and SMEs, the MRR is the central pillar. It is to be implemented through the Spanish National Recovery Plan, which was approved by the European Commission on 16th June 2021. The plan includes a package of reforms and public investment projects to be implemented over the coming years.
Spain ranks second after Italy in terms of the amount of funds to be received, with almost 60,000 million euros from the MRR to be executed in a maximum of 4 years in the case of reforms and 6 years in the case of investments. The plan is for each of the Autonomous Communities to publish its own Decree Law to streamline the administration and management of these funds.
Strategic Projects for Economic Recovery and Transformation
One of the features of this Plan is the creation of the Strategic Projects for Economic Recovery and Transformation (PERTEs).
The PERTEs will be large-scale projects that will have the capacity to drive economic growth, employment and competitiveness and will be implemented in public-private partnerships. These large macro projects will be an umbrella for smaller projects. Any entity interested in the PERTEs will need to register on a public list created for this purpose by the Ministry of Finance. These entities will then be given preferential consideration for collaboration with public administrations in the development of projects.
It is also expected that the approval of these projects will be more agile and that they will be processed more urgently in order to reduce timescales. Agreements will also be speeded up, as they are a key element in ensuring public-private collaboration.
How to access the European aid for recovery
In order for the funds to really transform the Spanish economy, both the Autonomous Communities and Local Entities will be involved and they will both have an active part to play in the proposal and the development of projects. These administrations will collaborate with the different ministries, who will launch calls for the submission of projects by sector. It is expected that these calls will be open to any interested entity (companies, SMEs, NGOs, civil society, etc.) to present their own projects.
Attention will be paid to each tender, although in general the MRRF will only finance non-recurrent expenditure that represents a structural change and that has a lasting impact on the economy and on sustainability and competitiveness in the long term. Issues such as renewable energy, digital transformation, environmental protection and restoration, climate change, social protection or health will play a prominent role.
The National Recovery Plan sets out 10 policy levers which in turn integrate 30 plans of action into which projects will be grouped. This complies with the priorities laid out by the EU for the approval of the plan, so that more than 37% of the investment will go to green investment and 33% to digitalisation.
Of the total allocation of 72 billion euros from the MRR and React-EU funds, the following amounts have been earmarked for industry-related Leveraged Policies:
- Urban and rural agenda and the fight against depopulation: 16% of the funds
This policy includes sustainable mobility in urban environments, housing restoration and the digitisation of the logistics chain of the agri-food and fisheries industry.
- Resilient infrastructures and ecosystems: 12.2% of the funds.
This includes sustainable, safe and connected mobility projects.
- Fair and inclusive energy transition: 8.9% of the funds
This policy includes the means of energy generation through renewable sources, electricity infrastructures, integration of hydrogen as a renewable source, etc.
- Modernisation and digitisation of the industrial framework and SMEs, recovery of tourism and promotion of entrepreneurship: 17.1% of the funds.
This part includes the Spain 2030 Policy, boosting SMEs, modernisation of the tourism sector, digital connectivity, boosting cybersecurity and deployment of 5G.
This aid comes at a very necessary time and is a great opportunity for our industries to take a step forward. At Centum, we can help you with all of this. If you would like more information about our services, please do not hesitate to contact us.us.
