Autor: María Gracia Moreno Vegas
Endowed with more than €800 billion, NextGenerationEU is a temporary economic recovery instrument articulated within the framework of the Recovery Plan for Europe. Included in the EU’s long-term budget, which reached its final stage of adoption on December 17, 2020, this would be the largest funding package ever approved in the history of the European Union.
These temporary funds aim to fulfill the missions of:
- Promoting economic, social and territorial cohesion;
2. Strengthen resilience and adjustment capacity; 3;
3. Mitigate the social and economic repercussions of the COVID-19 crisis;
4. Support the ecological and digital transitions.
For this, the NextGenerationEU funds are articulated in seven instruments:
-The Recovery and Resilience Mechanism (RRM): with an allocation of €650 billion for all Member States as a whole, its mission is to support investment and reforms in Member States to achieve a resilient and sustainable recovery, prioritizing the digital and ecological transition.
-The React-EU fund: endowed with some 47.5 billion euros for all the Member States and acts as a structural fund, although it has greater agility and executive flexibility.
–Other European funds: the Next-Gen funds will contribute resources to another subgroup of European funds, although not of a principal nature, such as those already known: European Agricultural Fund for Rural Development (EAFRD), Just Transition Fund (FTJ)Fondo de Transición Justa (FTJ) recently created which aims to provide resources to the territories most likely to be negatively affected by socio-economic challenges the transition towards climate neutrality, Horizon Europe (European research framework program I+I 2021-2027), InvestEU (stimulus fund for European investment), RescEU focused on disaster resilience and analysis of emerging risks and crises.
Compared to the allocations of the multiannual financial framework 2021-2027, whose total is €1 210.9 billion compared to €806.9 billion for NexGenerationEU, of the seven action points to which the Recovery Plan for Europe allocates resources, the NextGen funds focus on financing three categories:
1) Single market, innovation and digital economy with €11.5 billion;
2) Cohesion, resilience and values with €776.5 billion; and
3) Natural resources and environment with €18.9 billion.
Now then,
How does this affect Spain, what percentage of these funds will we receive, and who will administer them?
In general terms, Spain will receive 140 billion euros from the European Recovery Plan, of which it is estimated that around 72 billion will be “non-refundable”, i.e., without any need for repayment.
To coordinate the administration of these funds, the executive has created the PRTR or Recovery, Transformation and Resilience Plan “Spain Can” with the aim of accrediting a modernization of the Spanish economy and a “resilient recovery” after the COVID19 pandemic and in view of the climate neutrality that the European Union aims to achieve before 2050.
This plan is articulated in four guidelines:
Green Spain,
Digital transition,
Gender equality
Social and territorial cohesion,
Which in turn are supported by 10 ‘lever’ policies and these in 30 components.
Thus, the PRTR envisaged using 70 billion euros in direct transfers from the second quarter of 2021 until the end of 2023, with the funds having to have been fully liquidated before the close of 2024.
Likewise, according to the most recent entry (June 2022) of the Recovery Plan Execution Report, a public investment of more than 30,000 million Euros is diagnosed, being the autonomous communities with the largest allocation: Valencia (1,426 million) Madrid (1,652 million), Catalonia (2,181 million), and Andalusia (2,574 million).
With a total distribution (as of May 31, 2022) of 15,580 million euros among all the Autonomous Regions and a pending amount to be distributed of 95 billion euros, the sectors that have benefited the most have been
- PERTE CHIP: an allocation of 12.25 billion dedicated to industrial production of microelectronics and semiconductors (approved on May 24, 2022 by the Council of Ministers), and
- PERTE VEC: an item of 4.3 billion euros in order to lead the development of electric mobility (approved by the Council of Ministers on July 31, 2021 and by the European Commission on December 9 of the same year).
However,
What about investment in refurbishment and sustainable recovery in real estate?
Actually, within the framework of the PRTR, there is no specific PERTE investment for this purpose, but it would be included in different PERTEs such as ERHA, aimed at “accelerating the ecological transition and strengthening the strategic economy”, and Pilot Project investments.
And, in this same line of action, explicit references to investment in the real estate sector can only be found within the items for the “Publication of the order of bases and call for the rehabilitation of publicly owned buildings (PIREP LOCAL)”, to which 600 million euros have been allocated and is part of the package of policies of “Ecological Transition”; or less explicitly in the item of the “Tourism Sustainability Plan” (1,380 million euros).
All this, however, would be included in Lever I of the PRTR, titled “Urban and Rural Agenda” with the involvement of the Ministry of Transport, Mobility and Urban Agenda (MITMA), especially in Component 2 “Implementation of the Spanish Urban Agenda: Housing Rehabilitation and Urban Regeneration Plan”.
However, it should be recalled that at the time of the plan’s approval, the Government estimated that it would allocate 6.8 billion to the energetic renovation of buildings, of which 3.4 billion should be earmarked for housing refurbishment.
According to the Executive’s estimates, which are everchanging, the aforementioned goal of reaching the liquidation of Next Gen funds before the close of 2024 will not be a realistic possibility, since recently published reports estimate 2026 (in its second quarter) as the deadline for achieving 510,000 housing renovation actions (i.e., assuming an average rate of 71,000 homes per year), of which currently only 31 100 have been achieved in 2019, for example.
Taking all this into account, we must also add the government’s estimate of a 10-fold increase in the average pace of 2019, reaching an assumed 300,000 dwellings per year in 2030.
While these estimates may be essentially disjointed and implausible, we must take into account, as a last instance of analysis of the viability of these estimates with respect to the PRTR and the NextGenerationEU Funds, the increase in the price of renovations in Spain, which is 6.4% at the close of May 2022, being the highest historical figure for this segment as reported by the National Institute of Statistics, added to an inflation of 15% in the price of construction materials.
The reason for this is, among other inflationary trend components of the post-pandemic European market, a factor that the Recovery, Transformation and Resilience Plan could not have warned about when it was conceived: Russia’s invasion of Ukraine, a geopolitical crisis that triggered already soaring energy supply prices, with particular impact on materials such as steel.
This inflationary trend is inherently an obstacle in the economic and legal security of the Recovery and Resilience Plan, as it would mean a proportional reduction in the average pace of housing rehabilitation, leaving the estimate of 71,000 homes per year in 2026 reduced to a number of approximately 43 290, less than half of what was planned. due to the rising cost of materials.
Although the reality of the increase in the price of materials and the estimate of reductions in the number of homes renovated were excluded from the last update of the PRTR report (despite the fact that it was published after the official publication of the INE statistics), it is worth asking whether the update of the next quarter will have more realistic projections of the impact of these funds on the Recovery Plan and, subsequently, of the results of this on the Spanish socioeconomic reality, which is in the midst of an unprecedented inflationary trend.
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