THE EURO ZONE
A feeding frenzy has begun for the EU's "Next Generation" recovery funds, with several top Spanish companies pitching for their share of the post-Covid bonanza. It's heady stuff, with CEOs breathlessly talking of Spain becoming the digital "Heathrow of Europe" by 2025. But one wonders whether private sector heavyweights should be receiving any of Brussels' €750-billion fund, which is supposedly for EU countries that have been especially affected by the virus and/or their governments' haphazard attempts to contain it.
Among the potential beneficiaries of the €72 billion in grants allocated to Spain is Telefónica, the Spanish telecommunications multinational worth $114 billion, and rated by Forbes as the world's 110th largest company. Also in line for a serious cash injection is Bilbao-based Iberdrola, the electricity behemoth that posted a profit of $3 billion in 2018. Joining these two on the list of hopeful applicants for EU funds is car manufacturer Seat, wholly owned by $488-billion parent company VW (itself a subsidiary of Porsche). To what extent, exactly, are these massive companies dependent on a one-off EU payment in the pursuit of new initiatives or the creation of new technology?
Amid grand plans for "digitalisation" and the increased role of green energy, it's easy to forget that Spain's GDP is expected to contract by as much as 12% this year, and that its unemployment rate is at 16%, up from an already-problematic level of 14%. The second issue, which the EU wants Spain to address as a matter of urgency, seems to point to fundamental flaws in the labour and education systems, not just to the relatively recent impact of the virus. Yet of the recovery money coming Madrid's way, the government has set aside just 5.7% for "new care and employment policies".
The danger, as an EU economist recently told El País, is of Spain being "blinded" by the EU funds, of getting over excited by the box of cash that's appeared under its Christmas tree. It's of key importance, he said, that the Spanish government uses this opportunity to look at the fundamental problems underlying the economy, and to ask whether such problems can be solved solely with increased spending. Why, for example, does Spain have such a persistently high unemployment rate, especially amongst 15- to 24-year-olds? And what would a long-term, sustainable solution to that problem look like?
As the name of the EU recovery project makes clear, the money should help to create a more stable environment for the next generation. This is especially true in Spain, which has a jobless youth rate of 40% - the highest in Europe. Still, fingers crossed that Iberdrola finds a few extra billion under its tree this year.