Fedea urges the Government to negotiate an extension of the deadlines for the execution of the Recovery Plan

He believes that Spain “has overestimated” its ability to quickly absorb the investments provided for in the Plan

16 Jan. () –

The Foundation for Applied Economics Studies (Fedea) considers it convenient for the Government to negotiate with Brussels an extension of the execution deadlines for the Recovery Plan to ensure “good use of a historic opportunity.”

In a new work carried out by the organization on the monitoring of the reforms and investments of the Recovery Plan in recent months, Fedea stresses that, in retrospect, “it seems clear that Spain’s capacity to absorb” quickly has been overestimated. “Investment levels as high as those provided for in the Recovery Plan.

“It will be necessary to see what can be done to expedite its execution, but it would surely be convenient to prioritize the negotiation of an extension of the relevant deadlines in order to ensure the proper use of a historic opportunity,” he stresses.

Fedea assures that “very limited” information is available on the final execution of European funds, “because most of the entities and administrations in charge of it do not publish budget execution reports with the same urgency and detail as the General Administration of the Condition”.

Thus, with the information available up to now, it is only possible to quantify the degree of definitive execution of the resources based on the execution rate of the funds that the State manages directly and the amounts transferred to other administrations and entities.

In this way, Fedea estimates that the final execution rate in 2021 was a maximum of 27% of the total budgeted for the year and 11% in November 2022, to which must be added what was executed by other administrations charged to transfers from the General State Administration (AGE) of the previous year, which is unknown.

According to the latest delivery of the periodic data on the execution of the Plan published by the Government, the resources awarded, but not necessarily disbursed, in the calls and tenders resolved so far by the AGE and its dependent entities and companies amount to 13,757 million euros. , which is around 0.96% of GDP in 2021.

To this should be added the resources awarded by the autonomous communities, which, according to Fedea calculations, could raise this figure to between 1.14% and 1.55% of GDP in 2021, compared to the 4 points expected in the Recovery Plan project.

“Thus, the available data and estimates point to awards of 0.6 to 0.8 points of GDP per year and even lower disbursement levels, which represents a rate of around 30-40% of what was expected at the time “warns Fedea.

In accordance with the European Regulation establishing the Recovery and Resilience Mechanism (MRR), the funds allocated to each country, including loans, must be “assigned” or “legally committed” by December 31, 2023 at the latest. delay.

To clarify doubts about this provision, Fedea has made an informal inquiry to the representation of the European Commission in Spain, which has responded that this provision refers to the European Commission and not to the member countries. This means that the European Union must have formally committed the MRR funds allocated to the different member countries before the date indicated, but they do not have specific obligations regarding the use of the funds on that date.

What does affect the member countries is the time limit for the actual or physical execution, but not necessarily budgetary, of the projects, which is set in the aforementioned Regulation on August 31, 2026, the date on which they must have been fulfilled. the milestones and objectives established for the agreed investments and reforms, so that the final payments to the member countries can be made before December 31 of the same year.

In principle, the same limit would also apply to the Addendum to the Recovery Plan that is now being negotiated, including the new loan segment. According to Commission sources, the 2026 execution limit would be very difficult to change because that would require also amending the own resources decision that authorizes the Commission to issue new net debt to finance the MRR, which also expires in 2026. .

To change this rule, Fedea stresses that unanimity would be needed in the Council of the EU and the ratification of all the Member States, which in many cases would require the approval of the national parliaments.

“SIGNIFICANT” ADVANCES IN THE PERTE

Since the start of the Recovery Plan in the summer of 2021 until now, almost 70% of the originally planned spending has been implemented through calls for aid and tenders for contracts or transfers to the communities, which represents a “rate of starter” of 23% per semester.

Fedea confirms that “very significant” progress has been made in the implementation of the PERTE. With the new calls, the volume of resources mobilized has almost doubled, going from 6,650 million euros in June 2022 to 12,300 million in December of the same year.

“If we exclude from the denominator the PERTE Chip, which is still in preparation and will be financed from the Recovery Plan Addendum, the start-up rate of the PERTE (61%) begins to approach that of the Plan as a whole (the 69%), unlike what happened in June, when the ratio was 32% compared to 46%,” he explains.

However, Fedea warns that, in the most advanced PERTE, there are “signs” of certain difficulties in attracting enough quality applications to exhaust the available aid, especially in calls for companies.

CONCERN ABOUT THE PENSION REFORM

With regard to the reforms committed to in the Recovery Plan, Fedea detects “lights and shadows” and shows special concern for the pension system, as it has already done in other works.

In this sense, it points out that the available estimates suggest that the net impact of the changes proposed by the Government in the pension calculation period (raising it from 25 to 30 years, discarding the two worst years) would translate into “a slight reduction of the average initial pension of future retiree cohorts”, which would gradually be passed on to pension spending, helping to reduce it in the future, “but only very modestly”.

“Savings in 2050 would be at most 0.3% of GDP,” says Fedea, who points out that the Executive’s proposal to partially unblock social contributions “would not solve the sustainability problems of the pension system either, since it would contribute as much 0.15% of GDP in new revenue when completed in 2050”.

“The sum of both amounts is well below what is necessary to offset the increase in pension spending derived from the first phase of the ongoing reform, which the Government itself estimates at around 3.5 points of GDP in 2050”, concludes.

On the other hand, Fedea once again insists that the uncapping of the maximum contribution bases means promoting “a hidden and highly distorting tax that should not be part of the Social Security financing scheme.”