EU’s recovery funds missing in action.
In late 2021, Spain’s Socialist prime minister, Pedro Sánchez, unveiled the following year’s budget with great fanfare. The largest in Spanish history, it totaled almost €200 billion, €27 billion of which came from a new European financing scheme called NextGenerationEU (NGEU). Supposedly designed to help member states recover from the ruinous effects of lockdown, the NGEU’s main instrument is the Recovery and Resilience Facility (RRF), through which a total of €650 billion was borrowed on global markets and distributed amongst the EU’s 27 member states. Spain’s share was €163 billion—an amount finance minister María Jesús Montero claimed would be enough to ensure that the “recovery will reach everyone.”
Almost four years later, the Spanish economy is booming, but not due to the effective deployment of RRF funds. It recently emerged that Spain has requested just €47.96 billion, or 30%, of its allocated NGEU money—hardly enough to fulfill the promises made in 2022’s historic budget. In contrast, Italy, which received the largest share of EU funds, has already received 72% of its €196 billion. Spain’s lower figure is partly due to its limited loan requests—€340 million, compared to Italy’s €76 billion; instead, it has mostly opted for grants that are often misleadingly described as “non-repayable.” But flaws in the scheme itself, along with political problems specific to Spain, have also prevented the funds from having the impact that Sánchez promised they would.
The only part of the NGEU plan that seems explicitly designed to “mitigate the social impact of the crisis” is its “Social and Territorial Cohesion” element. In this area, Spain has unlocked €8.76 billion by hitting 27% of its assigned targets, just under the EU compliance average of 29%. Apart from that, the RRF seems more like an instrument to advance the EU’s environmental agenda than a fund for post-pandemic recovery (Brussels, of course, claims that the latter is best achieved by pursuing the former, but the connection is far from obvious).
In order to receive payments from the scheme, EU members must allocate 37% of their RRF funds to the green transition and 20% to digital reforms. Payments are only unlocked by compliance with dozens of milestones, all of which are imposed by Brussels. Sánchez’s inability to pass an EU-mandated diesel tax hike is currently blocking Spain from accessing a fifth tranche of funds worth €24 billion. Meanwhile, Brussels is pressuring Madrid to submit its remaining RRF requests before the August 2026 deadline—but the situation won’t change. Sánchez lacks a parliamentary majority and has been unable to pass a budget since 2023, which in itself has contributed to the ineffective deployment of EU funds within Spain. A report published last July by the European Court of Auditors (ECA), the bloc’s fiscal watchdog, identified Spain as the least effective spender of Brussels’s money, and called for it to return misused or unspent funds.
Far from singling Spain out, the ECA has been highly critical of the NGEU scheme. In another report released this May, it claimed that the RRF is operating with a “limited focus on results [and] no information on actual costs,” adding: “[I]t is not clear what we got for the money.” The ECA has also expressed concerns about the “absence of a dedicated source of EU funding” to back EU debt bonds, issued on the global markets to fund NGEU and set to mature between 2028 and 2058. Although member states reimburse Brussels their individual loans, the “non-repayable” grants will be absorbed into future EU budgets—i.e., paid back by contributions from member states, proportionally based on their gross national income. In other words, wealthier northern countries will foot the bill for the billions given to poorer southern countries.
As the ECA noted, lack of transparency has been a recurring problem within the NGEU scheme, especially in Spain. The computer system designed to log Madrid’s disbursements of RRF funds to private entities and regional governments was meant to be operational by the end of 2021. A year later, it still wasn’t ready—which inadvertently highlighted the need for digital reform in a country where bundles of paper are still required for most bureaucratic procedures. In late 2022, the IMF reported that “the lack of systematic and comprehensive information on execution, including in national accounting terms, makes it difficult to assess the extent to which [NGEU funds] are reaching the [Spanish] economy.”
The IMF’s concern was shared by Monika Hohlmeier, Chairwoman of the EU Parliament’s Committee on Budgetary Control. In early 2023, Hohlmeier told the Spanish daily ABC that she was “very worried” about the opacity surrounding Spain’s management of NGEU payments. By February (with the computer system still nonoperational), Hohlmeier traveled to Madrid to investigate: “We will go to Spain,” she said, “because the government doesn’t tell us where the [Next Gen] recovery funds are.” Eva Poptcheva, at the time an EU representative of Spain’s now-defunct Ciudadanos (Citizens) party and part of the delegation, said they weren’t told “how much money has flowed into the economy” but “had access to independent reports that speak of lower figures than those given by the government.” (She didn’t specify sources or statistics.)
Spain is also under scrutiny by the EU Prosecutor’s Office over the so-called Koldo corruption case, named after Koldo García Izaguirre, a former assistant to the Socialists’ ex-transport minister José Luis Ábalos. Both are suspected of taking kickbacks on face mask contracts. At the end of June, Santos Cerdán León, the Socialist party’s former organizational secretary and a close Sánchez ally, was arrested after a judge found “firm evidence” of his involvement in such schemes. Sánchez apologized to the nation for having trusted Cerdán León, but has so far resisted the opposition’s calls for a snap election.
Spain wasn’t alone in once believing that the NGEU program could transform society—magic money on tap, with the power to reverse pandemic-era stagnation. But the reality has fallen short of the no-strings bonanza many governments imagined. Hampered by opacity and bureaucracy, and tied up with the EU’s green agenda, the funds have had a limited economic impact. In Spain’s case, their efficacy has also been diminished by a government unable to pass budgets and allegedly mired in corruption. It remains to be seen what their legacy will be for the next generation—apart from a financial burden that will take 30 years to offload.
