Spain's Industrial Losses Shrink by 40 Percent as Next Generation Funds Phase Out: Implications for Decarbonisation and Industrial Strategy
Spain has announced a significant reduction of up to 40 percent in its industrial funding allocations, just six months before the termination of the Next Generation EU funds designed to mitigate Covid-19 economic impacts. The government of Pedro Sanchez has scaled back industrial grants from 42.48 billion euros to approximately 25.31 billion euros, with unclear immediate economic consequences.
Of particular concern is the notable cut in the Industrial Decarbonisation Project (Perte de Descarbonizacion Industrial). The latest amendments presented to the European Commission show a reduction of 1.635 billion euros, amounting to a 51.6 percent decrease from the initial plan. This cut potentially undermines efforts to promote sustainable industrial practices.
Although the Semiconductor Project (Perte Chip) has not seen a total removal, it has been pared back by 9.903 billion euros in the January addendum, representing an 80.8 percent reduction. According to analysts specialising in Next Generation funds, this means only seven projects are likely to be executed, with no new factories established in Spain.
In addition to project cuts, there has been an elimination of 14.79 billion euros in loans dedicated to various Perte initiatives including those for hardware manufacturing, electric vehicle manufacturing, health, aerospace, and the new economy sector. Transfers associated with water, health, and aerospace projects have also been diminished.
These reforms, incorporated into the seventh addendum approved by European authorities, reduce planned investments across strategic sectors by over 10 billion euros. The government also shelved legislation on industrial regulation, notably the Law of Industry, which was part of the reforms promoted by Sanchez.
In the context of other sectors, the overall recovery plan has been significantly scaled down, affecting housing, healthcare, transportation, environment, research and development, tourism, sports, renewable energy, training programmes, small and medium enterprises, accessibility initiatives, professional training, measures against gender-based violence, immigration policies, and childcare facilities.
Specifically, in the industrial sector, the removal of the Industry Law signals a retreat from formal legislative commitments to industrial growth. Since 2018, Spain has seen the closure of 15,400 industrial companies, accounting for 8.5 percent of the total industrial enterprises, reflecting a broader contraction in the sector.
Furthermore, the Digital Kit initiative, initially aimed at supporting 2.5 million businesses and freelancers—originally targeting 800,000—has been cut from investing 752 million euros in ultra-fast broadband projects to just 251 million euros, a 66 percent reduction. This diminishes high-speed internet connectivity in rural and underserved areas, impacting digital transformation efforts.
Legislative rollbacks are also evident, with several laws discarded or replaced by lower-impact regulations. Notably, the Law of Fisheries, the Film Law, and the Sports Law are excluded from current reforms. In some cases, legislative modifications have been replaced with reductions in normal legal provisions. For example, the Law of Family Diversity is being substituted by an extension of paternity and family care leave.
Sanitary sector reforms include a shift from a law guaranteeing rational medication use to a plan to rationalise consumption. Additionally, the Law on Measures for the Equity, Universality and Cohesion of the National Health System has been abandoned in favour of establishing a National Public Health Agency. These changes reflect ongoing difficulties in achieving parliamentary consensus, with amendments frequently delayed or heavily modified.
Overall, Spain's move to scale back industrial investments and legislative initiatives highlights both the challenges of transitioning towards a sustainable and modern economy and the potential setbacks in strategic sectors. The decision may have long-term consequences for industrial innovation, decarbonisation goals, and economic resilience as the country shifts away from targeted public support.
Date: 2026-02-17 06:55