The European Commission is creating a system of coefficients to penalize breaches of recovery plans

The European Commission has started to evaluate the performance of European funds – in the case of Spain three exclusions – without defining a penalty system in case of non-compliance. So far, no country has defaulted, but it could happen. The community government has already defined the rules and issued a communication this Tuesday. The mechanism is based on a system of coefficients by which Brussels intends to make the punishment more severe, depending on the importance of the violated milestones or the objective.

“A milestone or end goal would be more than an intermediate goal followed by milestones and goals related to the same investment. This explains the differentiation in the methodology between investments and reforms, as well as the coefficients and upward or downward adjustments applied to the suspended amount to reflect the importance of the stage or objective at stake,” the Commission said in a statement. It therefore leaves room for interpretation.

As a general principle, each missing milestone will have a value that will be obtained from the total amount for that country (in the case of Spain planned for about 70,000) of the milestones (which are in the recovery plan of the government of Pedro Sánchez). 415). But then different coefficients will be applied to it. For investments, the commission annex includes 2 for those who represent more than 10% of the support or non-repayable loan, with a limited number of stages and tasks (at least 5); 0.5 for small investments or intermediate stages; and 1 for all others. But the Commission sets a series of adjustments based, for example, on the progress made in implementing the measures.

In the case of reforms, a coefficient of 0.5 will be used for intermediate stages and 5 for stages and goals related to the entry into force of the reform or the last stage of the implementation of the non-legislative reform. On the other hand, the Commission envisages a complete suspension of funds only when deficiencies in the control and audit systems are discovered. In addition, it establishes a six-month period to eliminate failures in milestones and unfulfilled targets before partially suspending the corresponding payment.

Given that Spain has already satisfactorily implemented the first three disbursement mechanisms, the mechanism could be used from the fourth, which the government is currently preparing.

The main reform that is at stake in this case, and therefore the one in which the executive authorities play the most funds, is the pension reform, which has four fundamental stages: the extension of the calculation period for the calculation of the retirement pension, the intergenerational equality mechanism, the expansion of the maximum contribution base and the publication of the report , which shows the stability of the system. Regarding the latter, the Commission drew Spain’s attention by expressing doubts about the system. Brussels is considering the possibility of reducing the payment in cases of “special importance” in order to comply with specific recommendations made to the country to improve its economy.

Executive authorities know the importance of pension reform in the overall recovery plan. This explains why the Minister of Social Security, José Luis Escrivá, has traveled to Brussels twice in the past two weeks to negotiate with the community’s authorities. Although the main obstacle to negotiations with PSOE allies is the reporting period, the minister insisted on Monday that a deal is “very close” and assured that the measure will be part of the legislative changes.

Source: El Diario

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