Spain is going to have extraordinary expenses to face the reconstruction of the destruction that DANA has left in the east of the country. In Brussels they are aware of the complex situation and assure that they will provide financial support. Beyond the financial assistance that is channeled through the EU Solidarity Fund, the vice president of the European Commission, Valdis Dombrovskis, has opened the door to making the rules of fiscal discipline more flexible so that extraordinary costs do not count in the deficit of the following year.
“The European Commission will continue to provide all necessary support to Spain in this difficult situation. This also concerns the fiscal rules,” Dombrovskis explained in a press conference after the meeting with the EU Economy Ministers, to which Carlos Corpo canceled his presence precisely to attend to the needs of DANA, such as the aid of 10.6 billion that the Council of Ministers approved this Tuesday.
Dombrovskis has explained that the rules of fiscal discipline that the EU agreed at the beginning of the year as it resumed its stagnation after years of expansive spending to overcome the crises of the pandemic and the war in Ukraine include exemption clauses for emergency situations. The Latvian commissioner has pointed out that this regulation includes “provisions on important events that are beyond the control of the Government.”
Flexibility represents, therefore, a certain relief so that Spain can spend on reconstruction without that money being counted in the debit of the public deficit which, once the fiscal rules are resumed, should not exceed 3%. In fact, the European Commission saved Spain from an infringement procedure because the forecast is that it will end the year right at that threshold, despite the fact that last year, which is the one taken as a reference, it did exceed that figure by six tenths.
“Under EU tax rules, a Member State could be allowed to treat national expenditure (including loans under the Recovery and Reactivation Facility) directly related to a natural disaster as exceptional expenditure, which would be will be taken into account when assessing a possible deviation from the nominal deficit target of 3% or from the net spending path in the context of our fiscal supervision,” explains a spokesperson for the European Commission, adding that “expenditure using proportionate subsidies by EU funds are deficit-neutral and excluded from net spending growth.” “Therefore, its use to deal with a natural disaster would not have a negative impact on the country’s budgetary situation,” he says.
Dombroviskis has assured that the services of the European Commission are “already in contact with the Spanish authorities to discuss the possibilities and what the needs are.” He has also mentioned the possibility of reallocating cohesion funds or the recovery plan to deal with the reconstruction of the areas hardest hit by DANA.
The other leg on which the Government and the European Commission are working is in the request for money from the EU Solidarity Fund, which is the tool available to member states to receive financial assistance in the event of natural disasters. Although Pedro Sánchez has assured that the request has already been made, it has not been made formally but rather contacts have begun. Spain has twelve weeks to submit the request and then the European Commission evaluates it and the disbursement largely depends on the remaining budget, which annually amounts to about 1.4 billion euros.
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