The Spanish Recovery Plan (II): Architecture

Spain has been one of the most affected European countries by the Covid-19 pandemic in 2020, adding to the outstanding investment gap and widening inequalities that have dragging productivity and potential growth since the previous financial crisis. The safety net deployed since last Spring has been very effective to sustain the productive tissue, employment and household incomes, mitigating the economic and social impact and ensuring a good basis for the recovery. But these short-term support measures are not enough to recover the pre-pandemic production level and growth path.

It is therefore essential and urgent to deploy an ambitious plan of investments and reforms to support the recovery in the short-term, to boost the transformation process in the medium-term and to foster a more resilient and sustainable development model in the long run from the economic, financial, social, territorial and environmental points of view.

The Spanish Recovery Plan submitted to the European Commission on April 30th foresees the deployment of an ambitious programme of reforms and public investments of up to 140 billion euro by 2026, with a significant frontloading in order to ensure a counter cyclical impact. In short, the Plan is about modernizing the Spanish economy, increasing productivity and the capacity to create quality jobs, to reduce unemployment and inequalities, to overcome imbalances that have hindered our development for decades and face the challenges of the 21st century with confidence.

To this aim, the Recovery Plan builds around four key axes of transformation, aligned with the European priorities, to support the green transition and the digital transformation, to increase social and territorial cohesion and gender equality.

These four lines of action, which are of a horizontal and cross-cutting nature, are translated into ten policy levers, which are complementary and mutually reinforcing, with the potential to boost activity and job creation and a structural long-lasting impact on the economic model, via a new urban agenda based on sustainable and connected mobility and a building renovation wave, resilient infrastructures, green and blue ecosystems, the energy transition boosting renewable energies, including green hydrogen, the modernization of public administration and of the productive tissue, with a particular focus on industrial policy, SMEs, tourism, digital connectivity and 5G, a focus on science, innovation and disruptive technologies such as AI, a strong investment in education and knowledge, vocational training and digital skills, a new care economy, labour market reform to reduce duality, precariousness, the high share of temporary contracts, female and youth unemployment, the upgrading of the culture and sports industry, leveraging the role of Spain as global audiovisual hub and the reinforcement and modernization of the tax and public pension system.

Investment and reforms are presented in coherent packages (30 components), with a detailed roadmap to guide action at the national level as well as with the regions and local authorities, social partners and companies, industries and society as a whole.

In the first instance, the Plan foresees the mobilization of close to 70 billion euros in transfers from the European Recovery and Resilience Facility between 2021-2023, which will be complemented by loans as of 2022 to cover some financial instruments as well as the new mechanism of flexibility and stability in employment foreseen as part of the labour market reform. Around 40% of investments will be devoted to the green transition and almost 30% to digitalisation, with a clear commitment to education and vocational training (10.5%), R&D (7%), social inclusion and territorial cohesion.

The 2021 Budget already foresees 27 billion in public investments contained in the Plan and preparatory work has started in order to ensure a swift implementation and maximize impact already in the second half of the year. The process will accelerate from now on with calls for interest, allocation of funds to the implementing authorities and the launch of public bids and other legal tools for public-private partnership.

This is a nation’s joint project, requiring a well coordinated action on all fronts, by all economic, social and political actors, to make the most of the unprecedented European response to the crisis, to maximize the long term impact of this extraordinary programme of structural change, and to ensure that Spain is one of the engines of growth and prosperity for the whole EU in the coming years.