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The European Union's Economic and Financial Affairs Council (Ecofin) approved on Tuesday 21 January the modifications to the Spanish recovery plan which will allow it to release 25 billion euros in European aid, as part of the fifth payment of the Next Generation funds.
The addendum - presented in December - includes the diesel tax as one of the requirements for the country to receive this fifth payment, a milestone that must be met within two months, when the European Commission will give its definitive assessment of Spain's compliance with the agreed objectives. If not, the country could receive a partial payment, something that already occurred in the fourth payment of Next Generation funds.
The measure on the diesel tax is controversial as Podemos has said that it will only support the measure if a permanent tax on energy companies is created, something that PNV and Junts reject. Despite this resistance, on Tuesday the Minister for the Economy, Carlos Cuerpo, was optimistic and insisted that the government "is working" for the diesel tax to be approved "as soon as possible". He added that the measure will arrive "on time".
The milestone including the new diesel tax requires the government to carry out reforms in "areas of environmental, corporate, wealth, health and personal income taxation on capital income", which will include - among other measures - "the entry into force of the diesel tax increases".
The annex to the plan also serves to bring forward 55 milestones already met by Spain, including a total of 84 targets, which will give the country access to 25 billion euros, of which nearly nine billion are grants and another 16 billion are loans.
One of Brussels' demands is that the Spanish tax reform should lead to an increase in permanent revenue of at least 0.3 per cent of GDP, amounting to some 4.5 billion euros. If the Commission's technical teams detect shortcomings in any of the reforms, it will affect the payment Spain will receive.
European finance ministers also gave the green light to Spain's fiscal adjustment plan on Tuesday, which aims to achieve "sound public finances" and sustainable growth by carrying out "reforms and investments", avoiding excessive public deficits. With this decision, the EU gives its backing to Spain's path of deficit and public debt reduction.
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