The milestones pending for releasing 90 billion euros in European funds: from the Sustainable Mobility Act to the construction of 20,000 social housing units.

European funds are approaching the end of the year with many goals still to be scored. The lifeline thrown out in the midst of the pandemic expires in just over a year, and Spain still has more than half of its aid remaining, some €90 billion of the total €163 billion allocated between direct aid and loans. The figure is close to the annual expenditure on healthcare—it represents 5.6% of GDP—and its disbursement is subject to the completion of dozens and dozens of reforms and investments . The list is long and varied, and ranges from the approval of laws, including those on sustainable mobility, transparency, and industry, to the full deployment of strategic industrial projects such as the PERTE (Spanish National Telecommunications and Telecommunications) for the chip or the construction of 20,000 social housing units.

The roadmap is not only dense, but there are also looming curveballs in the machinery for implementing it: the Executive is parliamentarily weak, the chronic slowness of the bureaucracy compromises execution deadlines, and there are unknowns about the appetite of private demand , a key element in the development of the planned investments. "Many reforms are already advanced, but they have to go through Congress, and the Government is struggling to pass laws," notes Francesc García Donet, advisor to the European funds area of ​​the consultancy LLYC. This is the case with the laws on industry , families, and social services, all of which are currently being processed in parliament, and the law on sustainable mobility, which has been stalled since 2022 .

It's true that the recovery mechanism gives states some leeway to renegotiate deadlines and milestones with Brussels . This flexibility has become a lifeline for EU partners in general and also for the Spanish government, which is in the minority and is finding it increasingly difficult to secure the support of its partners. "The bottleneck isn't technical, it's political and administrative," emphasizes Manuel Hidalgo Pérez, a senior fellow at the think tank. EsadeEcPol.

Hidalgo warns of the difficulties in both legislating and implementing the funds, and mentions the Sustainable Mobility Law as one of the most critical reforms for the upcoming payments, especially due to the domino effect it would generate on future energy milestones and multi-million-dollar investments in electrification and transportation.

There are other ambitious initiatives that risk being strangled by lack of time and administrative hurdles: the energy renovation of 410,000 homes committed to mid-2026, the effective implementation of industrial PERTEs (chip, electric vehicles, green hydrogen), and the full digitalization of all levels of public administration. "In general, the implementation timelines for European funding are very long in Spain, but they can be extended. The recovery plan doesn't allow for this," warns Carlos Victoria, professor of economics at Comillas ICADE.

These commitments are complemented by a string of other measures, such as the film law, the creation of a public policy evaluation body, circular economy regulations, a strengthening of competition law, initiatives linked to the national health system and energy, and infrastructure investments. "There are two areas of difficulty: legislative reforms, which require delicate approval; and investments, which depend on private initiative," summarizes García Donet.

The government opted to implement significant legislative reforms, such as labor reform, in the early stages, leaving large loan-related investments for later. That's why many projects included in the final stretch of the plan, such as the construction of affordable rental housing or the energy-efficient renovation of buildings, will be channeled through public loans, which must be repaid. "Non-repayable grants generate quite a bit of interest, but we've seen that the same isn't true for loans. Companies find it easier to go to banks than to comply with the requirements for European funds, and interest rates have also fallen," explains the LLYC analyst. "The risk is that the money is available, but no one asks for it," adds Hidalgo, "then we automatically lose the funds in August 2026."

Deadline

Time is not only running out in ministerial offices in European capitals; there is also a rush in Brussels. The EU executive has urged member states to accelerate their plans in the face of the refusal of several partners, including Germany, to extend the deadlines and the resulting risk that part of the aid bazooka launched four years ago will come to nothing.

A widespread default would not be trivial. The figures are mammoth , a pot of 750 billion, and the entire mechanism is ambitious: it is sustained through the issuance of common debt, something unprecedented in the history of the EU and unthinkable during the previous financial crisis, when austerity ruled the day.

The fund, however, is not a blank check. Disbursements cannot be requested beyond August 31, 2026, and are conditional on the implementation of reforms and investments in strategic areas, agreed upon with Brussels in the respective national recovery plans. These must be completed by the end of next year. Spain, along with Italy, is the country that most benefits from the mechanism and one of the most compliant . To date, it has requested more than 72 billion euros in five payments, of which 55 billion correspond to non-repayable aid out of a total allocated of 79 billion euros (the remaining 83 billion euros are loans). To release these funds, it has completed 265 of the 416 agreed milestones, a tangle of figures that has crystallized mainly in legislative measures: labor reform, pension reform, the anti-tax fraud law, and the Rider law.

But the numbers also indicate that 151 milestones remain pending, many of them investments, to unlock primarily loans (47 billion), for a total of five more disbursements. "We're talking about almost 12 milestones per month [ milestones and objectives is the Brussels term for fulfilling the plan], and executing an amount that far exceeds the amounts committed so far. A significant risk is that Spain requests payments, but Brussels freezes them due to non-compliance," Hidalgo summarizes.

The fear goes beyond conjecture. The European Commission has just withheld more than 1.1 billion euros from Spain for failing to meet some of the agreed-upon targets: the government has failed to raise diesel taxes , compensate for the high temporary employment of civil servants, and make no progress in the digitalization of regional and local authorities as agreed. The mechanism allows six months to catch up, and it wouldn't be the first time that payments have been frozen and then unblocked.

However, the tax increase on diesel is causing concern, not so much because of the amount of aid withheld—around 400 million euros—but because of the precedent it sets in a complicated context: the Commission has been blunt in its freeze, and it doesn't seem likely that the tax change will be approved with the current parliamentary arithmetic . If we add to this the doubts about how the funds will be implemented on the ground, the alarms multiply. "Either the method of implementation is modified, or it will be very difficult to achieve this. However, we are not the only ones in Europe, and a relaxation of the time requirements for such implementation is to be expected," Hidalgo says.