On May 27th, 2020, the European Commission presented the Next Generation EU (NGEU) recovery package, comprising 750 billion euros in available funding. The aim is to stimulate the European economy and transform it after the pandemic. It also represents a clear message of determination to overcome an unprecedented challenge. After Italy, Spain will be the country receiving the most NGEU funds, namely, a total of 140 billion euros within the framework of the Recovery and Resilience Fund (RRF). The latter is a key element within the NGEU, consisting of 672.5 billion euros available as grants and loans to help to carry out the reforms and investments the different EU-member countries deem necessary.

To implement these funds, the Spanish Government has drafted a “Recovery, Transformation and Resilience Plan” (Plan de Recuperación, Transformación y Resiliencia or PRTR, also known as España Puede – “Spain Can Do It”). The PRTR represents an unheard-of planning exercise in Spain due to the magnitude of the investments involved and the planned reforms. The plan also provides details on how the Government will apply the RRF based on the specific Recommendations Spain received from the European Council within the framework of the European Semester in 2019 and 2020.

The PRTR includes a total of 102 reforms and 110 priority investment projects. In terms of the proposed reforms and in keeping with the mentioned Recommendations, Spain has to: improve the sustainability of its pension plan system; approve reforms in the employment area to foment open-ended contracts; simplify the incentive system to hire employees; correct the fragmentation and inefficiencies in unemployment benefits; fight against early school leaving; improve the efficiency of its use of public resources; and apply the Law on the Guarantee of Market Unity; amongst others. In terms of investments, energy transition and digital transformation are the priorities in line with EU directives.

The PRTR includes a total of 102 reforms and 110 priority investment projects

For Spain, the PRTR represents an extraordinary opportunity to bolster its recovery but, especially, promote a profound change in its production model. Due to its volume and timeframe, the plan should, as the Economist Jean Pisani-Ferry indicates, serve to “lay the foundations for a new development model.” However, at the same time, the plan entails major political, strategic, management and implementation challenges. To make the most of the available funds, a great deal of effort is required in four key areas:

1. Consensus on planning objectives: Due to the number of objectives and the scope of the reforms and investments needed as well as the broad timeframe to implement the plan, greater political, territorial and social consensus is fundamental for its successful launch and implementation. This consensus is also essential for the plan to be successfully perceived as an objective for the entire country and to guarantee its effectiveness and continuity over time. This will require greater coordination with the different territorial administrations which have ample experience in implementing European funds and which may be partly responsible for implementing the plan in the future. Similarly, the different political parties have to make greater efforts to reach transversal agreements to implement the reforms.

2. Transparency in planning and project selection processes: The Spanish plan has been very well received in the EU. However, this should not lead to complacency. Greater efforts can be made to improve the transparency of the investment project selection process to ensure that financing reaches the most innovative initiatives with the greatest social and economic return.

Due to the objectives and the scope of the reforms, greater political, territorial and social consensus is fundamental for its successful launch

3. Training public administrations to respond to the challenges: To improve the chances of the plan’s success and its perfect implementation, public administrations have to have the necessary technical and human resources. This implies strengthening professionalised and specialised teams with prior experience in public contracts; it also requires speeding up processes, reducing red tape and simplifying European fund management and control mechanisms. And, all of this has to be done across all three Spanish public administrations levels.

4. A real wager on structural reform: Despite the extraordinary economic development Spain has undergone in the past few decades, the productivity gap between Spain and its northern European partners has grown, not decreased. The España Puede plan establishes a long list of crucial investments and reforms for the next three years. However, the country’s commitment to the key structural reforms needed to improve the economy’s productivity remains vague.

This is particularly the case with respect to the job market, taxes, pensions, the interior market and the boost to human capital as well as in the educational and university areas and in terms of active employment policies. The vast amount of financing available and its concentration over the next few years represent a unique opportunity to implement reforms given that these funds can also help to greatly mitigate the social costs implied.

These funds can also help to greatly mitigate the social costs implied to implement reforms

Ensuring the success of how we manage these funds and the policies we define is a task that corresponds us all: the Government, parliamentary groups, territorial administrations, management and labour representatives, companies and, of course, civil society. It is exactly at this point where we feel called upon and affected.

Based on this appeal for responsibility, EsadeEcpol and EY Insights have decided to launch the “Next Generation EU Fund Observatory” to try to contribute to what has to be a collective effort. With this clear purpose in mind, the idea arose to create a forum to generate and share knowledge regarding this great objective and ensure that NGEU funds represent a true driver in the transformation of Spain’s growth model.

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