Spain Plans to Tap All Grants and Loans Available in EU Fund
Spain plans to make full use of the financial aid in the European Union’s historic recovery fund, which could amount to 140 billion euros ($166 billion), Economy Minister Nadia Calvino said.
The government “absolutely” will tap everything that is available to help the economy, which is among the worst-hit in Europe from the coronavirus pandemic, she said at at Bloomberg’s Capital Markets Forum Spain. The minister noted that there is a shorter period to access grants, so the government will focus on those first.
Spain and Italy are set to be the biggest beneficiaries of the package. Madrid will receive 72 billion euros in grants, which must be invested by 2023. The balance will be made up of loans.
“We are very interested in making sure that we commit this amount in the first three years, so that we do not lose one euro from the grant part, and the loan side can be implemented up to six years,” Calvino said. “Of course we are going to fully use the 140 billion euros.”
Progress in getting the package completed is currently held up because of a dispute over rule-of-law conditions between Hungary and Poland and other countries. EU leaders will discuss the issue during a virtual meeting on Thursday.
Calvino also said the government is committed to fiscal discipline and hopes that a stronger economic performance next year will help it reduce its budget deficit as a percentage of GDP.
The government, led by Socialist Prime Minister Pedro Sanchez, has spent billions this year to help businesses and workers. This week, it extended its loan guarantee program to ensure companies continue to have access to cheap financing and can delay debt repayments until the recovery strengthens.
Speaking at the same event as Calvino, European Central Bank policy maker Pablo Hernandez de Cos said Spain and other euro-aera countries need to continue their expansive fiscal policies.
He said the ECB will also do its part and that the “recalibration” of stimulus planned in December should focus on emergency asset purchases and long-term bank loans.
“If we look at the experience of the last nine months, these are probably the two main tools that have been more effective,” he said. “It’s a natural thing to think that they should be used again.”
He didn’t rule out an interest-rate cut but said such a move is unlikely, as the ECB is now closer to its lower limit.
“This is an instrument that you can’t disregard completely, but of course the possibility of moving downward is now much lower,” he said.
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