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Spain to ask for more than $89 billion in fresh EU funds

Economic Indicators Dec 20, 2022 01:02PM ET
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© Reuters. FILE PHOTO: Chair of the International Monetary and Financial Committee Nadia Calvino speaks during a IMFC news conference during the Annual Meetings of the International Monetary Fund and World Bank in Washington, U.S., October 14, 2022. REUTERS/Elizabet

By Belén Carreño and Inti Landauro

MADRID (Reuters) - Spain will ask the European Union for loans worth 84 billion euros ($89 billion) and a further 7.7 billion euros in grants as part of the bloc's COVID-19 recovery package, Spanish Economy Minister Nadia Calvino said on Tuesday.

That means Spain will seek its full allotment under the European pandemic relief package worth a total of more than 800 billion euros, as well as use 2.6 billion euros in new Repower EU aid aimed at improving energy security in Europe following Russia's invasion of Ukraine.

The next stage of the recovery plan must be approved by Brussels within two months after Madrid formally requests the funds, and their disbursement will be linked to new reforms and milestones.

The Spanish government estimates that the EU grants and loans will on average add 2.6 percentage points to gross domestic product annually through 2031.

"We are almost certainly going to have higher growth for this year than we had predicted in ... the budget for 2023," Calvino told a news briefing, without elaborating.

The Bank of Spain earlier on Tuesday slightly raised its economic growth prediction for this year to 4.6%, but cut the forecast for next year, to just 1.3%.

Inflation, bottlenecks and the rising cost of materials have taken their toll on the programme, and Spain has requested a review of some of the milestones already approved, and raised the idea of extending the 2026 deadline with Brussels.

Calvino said the EU soft loans would be channelled through state-linked investment vehicles so as not to inflate Spain's debt burden.

In total, Spain is seeking to mobilise 160 billion euros.

It has so far received 31 billion euros from the pandemic package, deploying around 22 billion, Calvino said.

However, a recent study by consultants EY and the ESADE business school estimated that just 9.3 billion euros had reached the real economy.

The 7.7 billion in grants and up to 18.6 billion in loans will beef up the financing already allocated to large projects, such as microchip production in Spain or green hydrogen.

Spain will create a new 2 billion euro facility to accompany foreign sovereign wealth funds seeking to invest in its recovery plan, after recent high-level meetings with several funds, including from Singapore and Kuwait.

($1 = 0.9427 euros)

Spain to ask for more than $89 billion in fresh EU funds

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WILLIAM HAGERTY Dec 20, 2022 1:07PM ET
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pay you back Tuesday
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