Spain will start receiving the first funds from the Next Generation EU (NGEU) programme in the next few weeks. It is essential that we hold an open debate on how to make the best use of these funds.
We cannot underestimate the importance of these funds for the future of the Spanish economy. The amount involved, being clearly material in size — at €140bn, it is equivalent to 11% of Spanish gross domestic product — is not the sole pertinent issue. The vital aspect is their potential use to transform the economy towards a greener, more digital one, as rightly prioritised by the European Commission (EC).
Succeeding with this goal means having a resilient EU, capable of dealing with the challenges of the 21st century. In other words, if we are going to rebuild our economies, it makes no sense to do so based on an economic model that has become obsolete.
Digital pioneers
Fortunately, digitisation and sustainability have been an essential part of the strategy of Spanish banks in recent years. Our banks have been preparing, learning and making large investments in this area for decades, making them leaders in technological transformation. And thank goodness we did. Digital banking has allowed us to offer clients remote services with agility, efficiency and without incident during the harsh and long Covid-19 lockdowns. Look at the government-guaranteed loan scheme (ICO programme): €120bn in loans constituting one million loans to around 700,000 companies in less than two months, with most (if not all) bank employees teleworking. That is quite a feat that has yet to be fully appreciated.
Fortunately, digitisation and sustainability have been an essential part of the strategy of Spanish banks in recent years
Regarding commitments to sustainability, we took the opportunity offered by COP25 to accelerate our efforts. In just over a year, the Spanish banking sector has become one of the top three in Europe in terms of environmental, social and corporate governance commitments. This is good news for the fight against climate change: there cannot be a green revolution without a green financial revolution.
As the EC recognises, the EU needs €260bn of additional investment per year over the next decade to tackle this challenge. The funds required are high and public investment will not be enough — private investors will have to step in to finance climate-friendly projects. The NGEU plan has shown that EU governments are backing their rhetoric with tangible public funds. In tandem with the private sector, the EU is in a position to deliver a decisive push in the transition towards more sustainable economies.
Distribution channels
But it is not just about co-financing. The banking sector can be tremendously useful, even indispensable, in the distribution of these funds. It has the experience and the means to channel these funds in a highly efficient way. Banks provide neutrality and well-defined yardsticks in any process, as has been seen in the ICO programme put in place last year to help companies to weather the economic consequences of national lockdowns. In addition, banks can also facilitate bridge financing and allow projects to speed up without the need for EU funds to arrive.
As mentioned, the ICO programme provided €120bn via more than a million loans that reached almost 700,000 companies — 98% of which were small and medium-sized enterprises (SMEs). This shows the effectiveness of public–private collaboration. We should apply a similar model to the channelling of EU funds. Moreover, SMEs should be the recipients of most, if not all, of the aid, given the multiplier effect that these investments can have on employment creation. We cannot ignore the fact that SMEs also require greater support for digitisation and sustainable transformation. The path to reach SMEs is the banking distribution channel. Banks, like no other financial player, know the needs of SMEs.
We have a unique opportunity ahead of us to modernise the Spanish economy, undertaking reforms that are years overdue. The NGEU funds, if spent properly, can help us emerge from this crisis with a stronger, more competitive and inclusive economy. The responsibility to use these funds wisely rests with all of us. The banks have the capacity and the skills needed to do this.
José María Roldán is president and chief executive of the Spanish Banking Association.
