THE EURO ZONE
Early this week, when it emerged that Spain will receive the second largest amount of Covid recovery funds in the EU (after Italy), there was cause only for a mini celebration. Firstly, in the role of grateful recipient, the country's Socialist government will have to tolerate much more external scrutiny of its financial affairs over the coming years than it would have liked. And secondly, €67 billion of the €140 billion package it's due to receive will need to be paid back, which begs the question of where, ultimately, that money will come from. In other words, Spain's recovery funds are attached to a number of tightly held strings.
Pedro Sánchez's minority government is becoming excessively comfortable with operating behind closed doors. Increasingly, it goes about its business with a concerning opacity, making deals with opposition parties in exchange for parliamentary votes, refusing to answer journalists' questions about newly announced legislation and pushing through "emergency" laws by Royal Decree without consulting Congreso.
It's therefore crucial that external bodies monitor its deployment of the recovery funds over the coming years. For being aligned with the "Frugal Five" (the Netherlands, Austria, Denmark, Finland and Sweden) in pushing for such monitoring, the EU arm of the Spanish Conservatives has been branded as "unpatriotic" by Pedro Sánchez, whereas the opposite is the case: if these funds are to have maximum benefit for Spain, the Spanish government, especially not the one that's currently in power, shouldn't have "carte blanche" in using them.
The accountability to Brussels and potential restrictions imposed by acceptance of the funds may set the government back in achieving one of its key aims - repealing some or all of the labour market reforms introduced by Mariano Rajoy in 2012. This is unlikely to sit well with Sánchez, but it's just one example of how the Socialist leader and his deputy, Podemos leader Pablo Iglesias, will have to adjust priorities for the rest of their term, pushing more ideological projects to the background in order to concentrate on post-Covid recovery. In any case, there's still no consensus between the two on exactly what aspects of the 2012 reform should be reversed.
It's also important to remember that, in accepting the €67 billion that comes in the form of loans, Spain is taking on more debt at a time when its economy is exceptionally vulnerable. None of this is to say that the Spanish government is mistaken in welcoming the emergency package from Brussels - clearly it was in need of outside help, which was only ever going to come from the EU. But whether these funds benefit the Spanish economy in a sustainable manner depends entirely on how they are used, and how Sánchez responds to external scrutiny. There might have been qualified cause for celebration earlier this week, but all the hard work remains to be done.