How will Spain use the European Funds to foster its economic recovery? The 2021 budget at a glance

  • The Spanish government is committed to the green transition and digitisation in its budget, in line with the priorities set by the European Union for Next Generation EU aid

  • Green energy, sustainable mobility and the circular economy will be crucial for the ecological transition

  • The digitisation of public administration and SMEs and the promotion of the digital connectivity of the Spanish economy are other major projects that the executive will promote

Following the presentation of the draft Economic Recovery Plan for Spain by the Government, more details are emerging about which sectors will benefit from funds

The General State Budget, drawn up by the Government, has specified the budget lines that will determine how the Next Generation EU Recovery Fund will be allocated. In 2021, the state intends to use 26 billion euros out of the 140 billion it will receive during the period 2021-2026.

In line with the priorities set out by the European Commission, the government is firmly committed to the ecological transition and digitalization of the economy and has budgeted two thirds of the total funds. These priorities are already reflected in the 2021 budget, whose main economic items are aimed at initiating this transition.

Funds for the green transition: who will benefit the most? 

The government will follow the guidelines outlined on the National Integrated Energy and Climate Plan 2021-2030 presented at the beginning of the year, in which the objectives are clear: decarbonise the economy by reducing greenhouse gas emissions, by increasing the penetration of renewable energies and energy efficiency, in order to complete the transition to a green economy that is self-sufficient for its energy. 

To accomplish the emission reduction targets, the renewable energy sector will especially benefit from this massive inflow of funds as fossil fuels will gradually be replaced by clean energy, ranging from the less developed technologies such as geothermal and biomass, to more established technologies like wind, solar energy, and emerging renewable hydrogen generation. The funds will be used to develop the infrastructure needed for demand management and the integration of these renewables into the energy grid, in addition to energy storage and smart grids.

Besides encouraging the use of green energy, public policies will have two main objectives to reduce emissions: the promotion of sustainable mobility and the renewal of housing stock. On the one hand, through fiscal help for renewing vehicle fleets and developing an extensive network of electric vehicle charging infrastructure, with the aim of encouraging people to switch to electric cars. On the other hand, it will also seek to increase exports of electric vehicles by developing logistics infrastructure and increasing competitive advantage in their production. Similarly, funds will also be used for the modernisation of transport infrastructure, with an emphasis on railways

Similarly, the renewal of housing stock will seek to improve the energy efficiency of housing, reducing its energy consumption and emissions. 

Other areas such as the efficient management of water resources (modernisation of irrigation and protection of ecosystems such as marine reserves) and the promotion of the circular economy and waste management will also benefit from aid. 

The green transition in the 2021 budget

Keeping in mind the sectors that will benefit the most from the inflow of funds during the whole period, we can have an approximate idea of the disbursement in the 2021 budget

The bulk of the amount budgeted for the energy transition is allocated to the Institute for Energy Diversification and Saving (IDAE), a public body registered under the Ministry of Ecological Transition, which will face the difficult task of managing, implementing and supervising 5.3 billion euros earmarked for the decarbonisation of the Spanish economy, following the guidelines of the National Integrated Energy and Climate Plan. It also includes some 1.8 billion euros for the rehabilitation of both housing and public buildings and historical heritage, and 2.3 billion euros in transfers to public transport companies, including ADIF and RENFE, which total more than 1.9 billion euros for the high-speed and ordinary railways

Also there will be significant investment in urban mobility, such as the creation of low-emission areas and improvements of transport fleets and suburban networks, which will amount to some 800 million euros, distributed among the various local and regional authorities. Finally, less than 600 million and 400 million euros will be allocated to the conservation of ecosystems and the development of the rural environment, respectively. These programmes will include sustainable forest management and the fight against forest fires, together with the improvement of agricultural competitiveness in the framework of the ecological transition.

Funds for digitisation: who will benefit the most? 

With the presentation of the España Digital 2025 plan last July, the Government had already set out the 10 major sectors which would benefit from European aid up to 2023. The two main objectives of the plan are the digitisation of public administrations and SMEs, boosting the competitiveness and digital connectivity of the Spanish economy. Besides these two big objectives, digitisation will affect the whole economy, including, among others, science, innovation, education, industry, mobility or infrastructures. 

The modernisation of different public institutions, including healthcare, as well as the digitisation of the education system and universities, appears as key for the public administration to evolve into a 21st century, fully digitalised administration. 

As far as the private sector is concerned, SMEs and industry will be the main beneficiaries, with millions of euros targeted at accelerating their transition to a digital economy that should allow them to compete more equally against other countries. The tourism sector, which is key in Spain’s economy and has been particularly hard hit by the pandemic, will also have to reformulate its strategy in terms of sustainability and the circular economy. Last but not least, other sectors hardly hit by the pandemic such as sport or culture will also receive specific support.

To have a more competitive and better-connected economy, digital infrastructures are key. In this sense, the territorial implementation of 5G is the backbone for state-of-the-art industrial development while also reducing the digital breach between territories. A good digital infrastructure will attract more foreign direct investment, positioning Spain as an innovation hub and, with policies encouraging the creation of start-ups, transform it into a productive economy based on high added value sectors. The digital training of the population is another key point in a plan in which public-private cooperation will be key to determining the success of the aid.

Digitisation in the 2021 budget

Almost 1.8 billion euros will be allocated to telecommunications networks, of which 800 million will be used to digitise SMEs, 600 million euros to close the digital gap and ensure the connectivity of the entire territory, and 300 million euros and 200 million euros respectively for the deployment of 5G and the improvement of industry's cyber-security capabilities. 

A total of 1.1 billion euros will be allocated to R&D&I with specific items aimed at promoting artificial intelligence, robotisation and big data and the digitalisation of production sectors and improving the digital capacities of citizens. In addition, another 1.1 billion euros are budgeted to public research bodies and the Centre for Industrial Technological Development (CDTI), which will strengthen industrial technological R&D.

Healthcare, forgotten for long time but that has emerged as key during the pandemic, will get almost 3 billion euros from the funds. Although one third of these funds will be used to solve short-term problems such as the supply of vaccines, two thirds will be used to strengthen primary care and to renew its technologies, with the long-term aim of modernising it and make it more resilient for the future.

Last but not least, almost 800 million euros will be allocated to modernize all ministries and territorial administrations, which will face the challenge of digitalising procedures and optimising the efficiency of their resources. Another million euros will be allocated to the digitisation of the education system, though there are no specific details on the specific programmes to be carried out. There is an expected allocation of 700 million euros in direct aid to tourism with special emphasis on the digitisation of the sector is included.

Public Affairs Experts - December 14th, 2020

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