The BdE fears a smaller effect of EU funds due to reaching fewer small companies

The Bank of Spain (BdE) fears that the transformative effect of the European Next Generation funds on the Spanish economy will be less in the long term due to the fact that the smallest companies, which are the “most financially restricted and with the greatest growth potential ” ” are benefiting to a lesser extent from the tenders linked to these disbursements. The organization led by Pablo Hernández de Cos has made public this Thursday a first evaluation report on the characteristics of the companies receiving the community program, which was designed to make in the face of the unprecedented shock caused by the Covid-19 pandemic.

In the case of the short-term impact, the BdE’s analysis offers a different reading, since it considers that the larger size of the NGEU tenders and the winning companies could contribute “to a greater positive impact on short-term activity.” in the sense that these companies have more capacity to undertake these projects without the need to withdraw resources from other investments that are not linked to European money.

According to the regulator, in general terms, the companies awarded tenders linked to the Next Generation are larger than the rest of the firms in the same sector and region (both those that do not access any public tender and those that access others not linked to the European program). Furthermore, the larger size of the companies awarded NGEU tenders is also accompanied by greater productivity and better conditions of access to bank financing in relative terms.

It is a notable difference in relation to what the entity observes in the case of subsidies linked to EU funds. The beneficiary companies are, in general terms, smaller than those that access other types of public subsidies. The organization links the fact that the companies that access the tenders are larger in size to the fact that the European funds themselves are financing tenders for projects “substantially larger than those of the tenders prior to the NGEU.”

Evaluate its effect on investment and business growth

The Bank of Spain sees it as “essential” to develop tools that allow quantifying the macroeconomic impact of the program and the criteria for allocating funds among the companies themselves. The objective should be to identify the effects that its reception is having on the investment and growth of Spanish companies, to the extent that the necessary information is available. It is not an insignificant detail in a country where more than 90% of the productive fabric is made up of small companies and where national and international organizations have identified problems so that these can escalate.

However, the entity emphasizes that the long-term impact of the NGEU program will depend, mainly, “on the transformative capacity of the selected investment projects and their complementarity with the structural reforms implemented.” He also points out that the necessary information is not yet available to carry out a rigorous study on these two aspects, although he emphasizes that “they will be the subject of priority analysis in the future” both for the Bank of Spain itself and for the Ministry . of Economy, Commerce and Business.