► Final deal cuts direct grants to 72.7bn, ups loans to 67.3bn with EU oversight
► Spain agrees not to repeal Rajoy-era labour reforms or hike pension spending
After four days of arduous negotiations, EU leaders signed a last-chance compromise deal early Tuesday morning to avert a region-wide economic crisis and provide recovery funds to economies hit hard by the coronavirus pandemic.
Under the terms of the deal providing a total 750 billion euros to European economies, Spain is set to receive 140 billion euros to be disbursed through a combination of 72.7 billion in direct grants and 67.3 billion in credits underwritten by the combined borrowing power of the entire EU bloc.
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Spanish President Pedro Sánchez told reporters in Brussels on Tuesday morning that Spain is 95-percent satisfied with the terms of the deal.
To illustrate the magnitude of the monies Spain will be receiving, Sánchez emphasized that the 72.7 billion in direct grants over the next six years is nearly ten times the total 7.8 billion that Spain received in the 1990s from the EU Cohesion Fund, set up to help countries joining the EU bloc reduce economic and social disparities and promote sustainable development.
In order to receive those funds, Spain agreed in the end to oversight by the EU Council of its compliance with agreed-upon conditions placed on the 67.3 billion in loans the country will now be able to access.
Those contingencies include maintaining the “flexibility” in the country’s labour market that were at the core of labour legislation enacted in 2013 by the conservative Partido Popular government under former-President Mariano Rajoy.
They also include Spain’s agreement to refrain from significantly increasing spending on retirement pensions, meaning that the retirement age for Spanish workers is likely to be extended so that more monies can be paid into the country’s Social Security coffers before workers hit retirement age and begin drawing down on their pensions.
Both the reforms to the Rajoy-era labour legislation and changes to Spain’s pension system that included indexing retirement benefits to cost-of-living increases were key planks in the progressive program agreed in November between Sánchez’ Socialist party and left-wing rival Unidas Podemos that brought Sánchez to power in January as the head of Spain’s current coalition government.
The outbreak of the global coronavirus pandemic within weeks of the government’s formation, however, immediately undercut the ability of the Sánchez administration to carry out lasting socio-economic reforms, as all government attention was immediately re-focused on combating the spread of COVID-19 and the immediate economic fallout of the pandemic.
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