Calviño's EIB begins the procedures to mobilize 3.6 billion European funds in regional projects

The European Investment Bank (EIB) has initiated the process of mobilizing the initial 3.6 billion euros of loans as part of the recovery plan to fund regional investment projects. Nadia Calviño, the president of the bank and former first vice president of the Government, made this announcement while presenting the EIB’s 2023 results at the European Commission headquarters in Spain. While the institution has taken the first step, the signing of agreements to define the management of these funds is still pending.

It is the intention of the EU public bank to deploy these loans throughout 2024. However, this is contingent upon the completion of new budgets by the Government, a process that is currently delayed and complex. Calviño emphasized that governmental approval is crucial as public accounts serve as the means to channel European funds and determine the framework for the implementation of these loans.

The allocated 3.6 billion euros are part of the 20 billion euros regional resilience fund dedicated to investing in regional projects centered on social and affordable housing, sustainable transportation, industrial competitiveness, and sustainable tourism. While these loans offer favorable conditions, including extended repayment periods and lower interest rates compared to market rates, they are not as advantageous as the non-refundable aid that has been the main focus of the recovery plan thus far.

No specific details have been disclosed by the EIB regarding the projects that will be financed with the initial tranche of the fund. The responsibility of defining these projects lies with the central government and the autonomous administration, who must reach an agreement. The EIB, under Calviño’s management, will participate in governance and provide assistance.

In total, Spain will receive approximately 83 billion euros in loan financing from the recovery plan, with the EIB managing a quarter of the amount allocated to the regional fund (20 billion euros). These funds must be allocated to definitive projects by August 31, 2026, at the latest, or risk being lost.

The significant increase in interest rates by the European Central Bank (ECB) since 2022 has impacted the effectiveness of this financing vehicle. When the mechanism was designed, interest rates were close to zero, making financing highly affordable. However, with current historically high interest rates, borrowing costs have substantially increased, making the investment less attractive.

Nevertheless, the EIB remains optimistic about the demand for these loans. The European public bank anticipates a reduction in interest rates by 100 to 150 basis points in the second half of this year. Such a reduction would result in rates decreasing from the current range of 4% to 4.5% to 2.5% to 3% in the best-case scenario.

The EIB invested 11.4 billion euros in Spain in 2023.

In 2023, the EIB allocated a total of 11.4 billion euros to Spain, accounting for 13% of the bank’s overall financing during that year. The majority of the resources, approximately 6.8 billion euros, were directed towards projects in the energy sector and the green transition.