The Government takes the first step to mobilize 40,000 million in loans from European recovery funds through the ICO
This Tuesday, the Government took the first step to begin mobilizing 40,000 million euros in loans from European recovery funds.. These are approximately half of the credits that Brussels has granted to Spain in this second phase of the recovery plan initiated after the approval of the addendum to the original plan in October 2023 and will be managed by the Official Credit Institute (ICO).
The Minister of Economy, Carlos Body, appeared this Tuesday after the meeting of the Council of Ministers in which the Executive gave the green light to the ICO to begin creating the vehicles through which the loans will be mobilized.. The 40,000 million will be distributed through five funds, which will be allocated to ecological and technological transition projects, business growth, public housing or the audiovisual industry.
For Corpus, the step taken this Tuesday represents the “formal start” of the second phase of the recovery plan, in which the Government will be able to mobilize up to 83,000 million in credits under “advantageous” conditions.. The Minister of Economy has also taken the opportunity to update the execution figures for the first part of the plan and has indicated that around 45% of the aid received has reached the real economy.
The Government's idea is that the first two lines of the ICO begin to circulate already in the second quarter. For this to happen, the organization must first sign an agreement with the corresponding ministries to which the credit institutions will then have to voluntarily adhere.. To finance this type of projects, the ICO turns to commercial banks, which are responsible for mediating with the client interested in receiving the loan.. Thus, the organization delivers the funds to the credit institution, which transfers them to the beneficiary. The latter must return the loan to the bank which, finally, returns the money to the ICO.
Five funds
Of the five “facilities” that the ICO will create to place loans, the best equipped is the so-called ICO-green line. This fund will have 22,000 million euros in loans to promote sustainable transportation or energy efficiency initiatives, among others.. 8,000 million will also be mobilized in the ICO-Companies and Entrepreneurs line, to finance the growth of companies, especially SMEs.
In addition, the Government will create a fund with 4,000 million in loans to finance housing projects. The aim is to increase the housing stock for social rental with affordable rents and improve what already exists.. Minister Corps estimates that 40,000 homes for social and affordable rental could be developed thanks to this financing vehicle.
In addition, the ICO will channel a fund of 4,000 million to facilitate the growth of Spanish startups. This vehicle will be managed by Axis, the organization's venture capital subsidiary.. Finally, the ICO will co-manage 1,712 million euros to finance projects in the Spanish audiovisual sector. It will seek to encourage private investment in film, television, content creation, video games or visual effects.
Loans, a less attractive vehicle
Spain's recovery plan has been structured in two clear parts. The first involved managing 70,000 million in non-refundable transfers. That is, direct aid that has been dedicated to different projects and of which the Government says it has already executed almost half.. After this first phase, in which the efforts have been focused until now, a second begins in which the Executive has the challenge of placing another 10,300 million in transfers and 83,000 million in loans.
The Government has already encountered some problems in allocating the funds for the first part of the plan. The bureaucracy is extensive and there are projects that receive less interest than expected. The consulting firm Llorente & Cuenca estimates that 17% of the funds tendered have not found a recipient. This does not mean that the money will be lost, but it does mean that new calls must be sought to find a recipient, something that is not easy with the strong bureaucracy that accompanies the plan.
In principle, the loans section should be less interesting. Firstly, because although the loans are under advantageous conditions – the interest is lower, there is a 10-year grace period in the payment of the principal, the repayment is 30 years and they allow 100% of the projects to be financed – at In the end you have to return the money.
Furthermore, the financing conditions that currently exist are not the same as when the original plan was designed.. At the time, ECB interest rates were at historic lows.. Today they set maximums waiting for the central bank to decide to lower them, predictably, in the second quarter. This has caused financing costs to skyrocket.. Consequently, requesting a loan is now much more expensive, which discourages the investment that is sought to be mobilized in this part of the plan.