Spain Deploys $16 Billion of EU Funds for Electric Transport

(Bloomberg) -- Spain plans to invest 13.2 billion euros ($15.7 billion) to boost electric vehicle use, one of a raft of measures as the government prepares to deploy European Union pandemic recovery funds to modernize the economy, Prime Minister Pedro Sanchez said.

Electrifying transportation is one of 20 flagship investments that Spain plans to make over the next three years, spending part of its portion of the EU's recovery fund, Sanchez said during a press conference on Tuesday in Madrid. Other programs include 6.8 billion euros to be spent on improving the energy efficiency of buildings and 4.3 billion euros for modernizing the public administration, he said.

“We have this great opportunity in Spain to carry out all the reforms and investments that we should have done a long, long time ago,” Sanchez said.

The fund is crucial to the economic recovery of euro-area member states, especially highly-indebted countries such as Spain that need its mix of cheap loans and grants to revive growth without sinking deeper in the red. Sanchez said the investments will boost economic growth by around 2 percentage points annually starting in 2022 and create more than 800,000 jobs.

Spain and Italy are set to receive the greatest portions of the fund because their economies faced the deepest contractions last year. Spain will receive 140 billion euros, around half of it grants that Madrid says it will focus on investing first.

Digital Jolt

The government will also aim to jolt the process of digitalization among the country's small- and medium-sized firms, roll out 5G across the country and boost competitiveness in the tourism industry, among other measures that will total around 70 billion euros through 2023.

Sanchez said his government will also implement deep-seated changes to further increase the growth potential of Spain's economy, including modernizing the health, energy and judicial systems. Madrid will send the detailed plan to EU officials in Brussels by the end of the month, the premier said.

EU Recovery Fund Risks Delays With Spending Plans Judged Sub-Par

The EU's recovery fund was approved last year. The slow rollout is prompting concern among some officials, with European Central Bank policy makers in particular repeatedly warning that any delay would damage the region's rebound. The initial tranches of the funds are set to be distributed this summer, as long as the European Commission approves member states' proposals.

Those concerns about a slower-than-expected deployment of funds have already dimmed the outlook for Spain's economic recovery. The Bank of Spain now expects the economy to expand by 6% in 2021, compared with a previous estimate of 6.8%.

The EU's slow progress stands in contrast to the U.S.'s swift approval of a $1.9 trillion package last month, which is likely to exacerbate the divergence between the two economies. That has raised the stakes for European officials to ensure that the recovery funds are invested effectively, boosting medium-term growth prospects among member states and the bloc as a whole.

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