During the early stages of the COVID-19 pandemic, the EU introduced a recovery fund called the Next Generation EU, aimed at providing financial assistance – through grants and loans – to member states affected by the crisis. This fund was designed to support countries in their economic recovery and promote investments in areas such as healthcare, digitalization, and green initiatives.

Italy, being one of the countries hit hardest by the pandemic, has received 48 % of the EU recovery fund based on several criteria including timely spending and value-for-money. These two requirements can at times be at odds with one another. But if you ask Italy’s new PM, Georgia Meloni, the two are outright contradictory.

Meloni, who came to power in October, is intent on ensuring that EU money is spent on investments in line with new strategic priorities of her government as well as unforeseen externalities foremost of which are; inflation and the war in Ukraine. In a blatant hostage-maneuver, Meloni has refused to ratify the EU’s efforts to enact temporary state aid exceptions for clean tech industries threatened by Biden’s Inflation Reduction Act, if Italy isn’t allowed to renegotiate the terms and time limit of relief funds. 

This is all old news… 

The new development is Spain, which after Sunday’s general election looks well-positioned for an Italian-esq ideological turnaround. This weekend, Spaniards will head to the polls to cast their vote in a snap general election called for by sitting PM Pedro Sánchez of the Spanish Socialist Workers’ Party (PSOE). In what is still a mystery to many, Sanchez announced the election the day after his party suffered a numbing defeat to the center-right Popular Party (PP) in Spain’s local elections. 

In the most recent polls, PP is predicted to become the largest party in the Spanish parliament, yet, fails to win an outright majority. At the very minimum. It looks like PP will need the mandates of the euro-skeptic VOX Party to seize governmental control. 

Source: Politico

Trouble is brewing… Second only to Italy, Spain is the largest recipient of EU Covid recovery funds – 17% of the total means to be specific. In addition, the right-way shift in power expected after the Spanish general election is – at the very least – as dramatic as in Italy when Meloni assumed the premiership. Will the new Spanish government fortify the Italian roadblocks in the EU’s State Aid efforts?

Source: ECB