Brussels toughens conditions to release European aid

From left to right, the President of the Spanish Government, Pedro Sánchez;

French President Emmanuel Macron and German Chancellor Angela Merkel examine documents during the EU summit in Brussels on July 20. JOHN THYS / AFP

The Government will not have a blank check to spend the 60,000 million euros in non-reimbursable aid from the EU.

Or at least that is what the European Commission intends.

Although these are rules still immersed in negotiations, the Community Executive has tightened the criteria with which the Next Generation EU recovery fund will be distributed.

According to the new guide and the draft regulation, previous recommendations for reforms that had not been met will be required to obtain these funds.

Fiscal adjustments will not be called for, which could worsen the recovery and are postponed until the economy has recovered;

but the reforms are.

This means that Spain will have to present a major change in pensions and promote permanent contracts.

Until now, the government thought that the only condition to which the funds were subjected was to spend them well.

The resources were to be delivered based on the completion of milestones that show that the investments are being worked on and that the money is being disbursed.

These milestones were agreed by the Executive with the Commission and were the only requirement to receive the funds.

Although the aid had also been linked to the recommendations of the European Semester, these were summarized this year in one idea: to combat the consequences of the pandemic by all means.

And "only when conditions permit," they will have to "pursue a prudent fiscal policy," they said in June.

Europe then gave carte blanche for whatever was necessary ...

Until now.

The Commission last week published guidelines for preparing national investment and reform plans.

And in these it is stated that only the June recommendations will not be taken into account.

Also those of previous years: “Member States should examine the full package of specific recommendations addressed to them by the Council, in particular under the 2019 and 2020 cycles. Unless the Commission has identified 'substantial progress' in these recommendations or a 'full implementation', all should be considered relevant.

The States should provide a detailed explanation of how they are going to respond to the recommendations with the proposed measures ”, reads the guide of the Community Executive.

Among the reforms that are to be carried out, it is worth highlighting “preserving the sustainability of the pension system” and “strengthening the budgetary framework”.

In these chapters, according to the Commission's latest review, “no progress” has been made.

There are also “limited advances” in promoting permanent hiring, the fragmentation of unemployment aid, the fight against school drop-outs, the correction of educational disparities by autonomy, investment and evaluation of research and innovation, efficiency spending and the Market Unity Guarantee Law.

In a meeting with various media, including EL PAÍS, the President of the Commission, Ursula von der Leyen, stated that "reforms and investments go hand in hand to modernize societies and economies", and recalled that, in addition to the priorities in green energies and digital agenda, there are also the recommendations of the European Semester.

In exchange for fiscal flexibility, Brussels will ask for further reforms.

"The Commission has put a greater demand through the back door," says a former senior official.

Thus, the Government is obliged to reel off in its investment and reform plan what measures it will adopt to make pensions sustainable.

Or what you will do to encourage permanent hiring.

The Community Executive will put a note

But that is not all.

Brussels has also established a

system

or traffic lights to grant the funds.

According to this scheme, up to eight points of the investment and reform plans will be examined: the changes required by the recommendations;

the green transition;

digitization;

whether the impact of the plan is lasting;

enhancing growth potential, job creation and social resilience;

the costs of investments;

if there is coherence between investments and reforms;

and the implementation plan, including the investment calendar, with its milestones and objectives.

Each of these headings will get a rating.

The A will determine that it is largely met.

The B, partially.

And the C, little or no way.

If a C is scored on any of the items, the Commission will not award the funds.

If more grades B is scored than A, the resources will not be delivered either.

And if you don't get an A on reforms, green transition, and lasting impact, then your money won't be released either.

Hence, the imposed system puts a lot of weight on the reforms and seems very harsh.

To the point that the European Parliament tries to moderate it.

Rather than lose all the money, MEPs negotiate so that for each notch below A on a rating 5% is withdrawn from the fund.

“The Commission and Parliament are looking to make a new conditionality that makes money well spent.

Some governments like that of Spain try to weaken that, ”says Luis Garicano, MEP for Ciudadanos and one of the members of the negotiating team for the regulation.

The battle to modify these rules has begun.

Nordic populars, liberals and socialists want to strengthen accountability.

Ruling parties in Italy and Spain seek, instead, to dilute it.

And the amendments of the European Parliament will be joined by those of the Heads of State and Government in a three-way dialogue between the Commission, the Council and the European Parliament.

The hardness of the final text will depend on the tug of war between capitals.

In any case, it appears that there will be some tightening of conditions.

And the Commission's guide will force the Sánchez government to portray itself with pensions in its reform and investment plan sent to Brussels.

That said, European sources point out that there is always some negotiating flexibility and that the examination could take up to one or two years while the Commission checks whether the measures have actually been taken.

The Minister of Social Security, José Luis Escrivá, intends to soon close an agreement on the pension reform in the Toledo Pact.

In his appearance behind closed doors before this parliamentary committee, the governor of the Bank of Spain explained to the deputies that the changes that are proposed solve the short-term deficit of the system, but also transfer the adjustment to the rest of the Budget and do not solve the increase in the spending that aging will generate for years to come.

The Eurocamara battles to have more budget

Germany, which holds the rotating presidency of the EU, is looking forward to an agreement with the European Parliament on the massive aid package agreed in July.

She wants to close it by the end of this month or the beginning of October and that it be submitted to a vote soon in the European Parliament and in the 27 national parliaments.

MEPs advocate separating it into three packages in order to get the upper hand: the recovery fund, own resources and the EU budget.

However, several countries have already warned that it is only one.

In silver: an all or nothing.

This is the case of Hungary, which communicated to the European Parliament that if it hardened access to funds in relation to the rule of law, it would not ratify the agreement.

There are two areas in which Strasbourg seeks greater ambition: a mechanism to freeze funds to Poland and Hungary if they continue to undermine the rule of law, and more money for programs that have been cut.

Community sources put their claims at 50,000 million euros, an amount that they see impossible to digest by the

countries

(the Netherlands, Sweden, Austria and Denmark), which reluctantly accepted a recovery fund with subsidies.

The European Parliament wants the recovery plans to go through the European Parliament.

However, diplomatic sources point out that the capitals are also reluctant to this transfer, since the

may try to ask for more reforms, although partners such as the Netherlands and Ireland could also find that the south requires them to end fiscal practices. that they consider unfair.