Spain pins Covid recovery hopes on green investment plan

Spanish king Felipe VI (R) and Spanish Prime Minister Pedro Sanchez

Credit: KIKO HUESCA/POOL/EPA-EFE/Shutterstock

Spanish Prime Minister Pedro Sánchez, under fire for his government’s handling of the Covid-19 pandemic, has announced a massive investment programme led by an “ecological transformation” of the country.

Spain has the European Union’s largest number of Covid cases, which now number more than 800,000, and more than 20 per cent of Spaniards are again under some form of lockdown or restrictions, with fears for the impact on the economy.

Mr Sánchez outlined an extraordinary spending plan of €72 billion focusing mainly on green and digital development over the next three years.

The money will be provided from the first half of €140 billion that will be made available to Spain from the EU’s 2021-27 Next Generation Covid recovery fund, with Mr Sánchez promising to accelerate decarbonisation plans.

Mr Sánchez brought forward a target to install 100,000 electric vehicle charging points to 2023 from 2025. Half a million homes will be retrofitted to be made energy efficient over the next three years, and there will also be funding to move faster towards a plan for all electricity generated in Spain to be renewable by 2050.  

Coronavirus Spain Spotlight Chart — Cases default

This week Spain’s government also published a road map for increased use of hydrogen as an energy source, a sector it says will generate close to €9 billion  by 2030.

In transport, Spain plans to have a fleet of at least 150 buses, 5,000 light and heavy vehicles and two commercial train lines all powered by renewable hydrogen by 2030, plus the use of hydrogen-powered handling and ground services machinery at the country’s top airports.

After the summer tourism season was all but wiped out by international restrictions on visiting Spain, Mr Sánchez’s government this week downgraded its economic prediction for 2020, now expecting 11.2 per cent of GDP to be wiped away.

Mr Sánchez claimed that next year’s extra spending of €27 billion thanks to EU funds would add 2.6 points to GDP and boost growth for 2021 close to 10 per cent.

“It’s not just a case of recovering the GDP that the pandemic has destroyed, but growing in a new way, on stronger pillars, in a world that has changed beyond recognition,” Mr Sánchez said on Wednesday.

Critics expressed doubts that the Spanish government will develop the mechanisms to make such large investments so quickly, citing the fact that Spain has the worst take-up of EU structural and investment funds over the current cycle, having spent just 34 per cent of its 2014-20 allocation. Britain has managed to absorb 46 per cent, despite the Brexit process.

But Mr Sánchez’s government has said it will “eliminate red tape” that has held up past investment plans.