Next Generation EU Funding in Spain: ICO’s 39.862 Billion euros Channel Investments Across Green, Housing, and Tech

A New Phase for Next Generation EU Funds in Spain: ICO Channels 39.862 Billion Euros to Boost Green, Tech, Housing, and Creative Sectors

There is a countdown to the moment when the euro billions allotted by the Official Credit Institute (ICO) under the European Next Generation EU program will begin to flow to businesses, self-employed professionals, and, to a lesser extent, private individuals. The Council of Ministers plans to approve, before the month closes, the agreements between the public bank and the Ministries of Economy and Housing to roll out the three principal lines of the program, totaling 34.150 billion euros. There is less certainty about securing the two remaining lines with the Ministry for Digital Transformation, amounting to 5.712 billion.

The most advanced lines are the ICO Green program, providing 22.000 billion in loans for green investments by households and both private and public enterprises; the ICO Companies and Entrepreneurs line, with 8.150 billion to finance business investments under favorable conditions; and a 4.000 billion fund to expand the social housing stock and affordable rental housing through public or private promoters, reaching roughly 40.000 homes. The other two lines are the ICO Next-Tech Fund (4.000 billion to accelerate growth for technology startups) and the Spain Audiovisual Hub, with 1.712 billion for the audiovisual and video game sectors.

The agreements with the ministries will set the precise conditions for each of the five lines, a necessary step before the ICO signs bilateral deals with the banks that will channel between 18.700 and 20.000 billion for financial entities participating in all lines except Next-Tech. An additional 8.750 billion will be funneled through private equity entities, while the remainder will be dispatched directly by the ICO via direct loans to companies and the acquisition of corporate debt tied to specific projects.

The ICO will contribute the resources to banks, which will execute operations with their clients and bear the risk if repayments fail. The loan rate for the bank will reflect the European Union funding cost, about 0.2 to 0.3 percentage points below the Treasury rate depending on whether the term exceeds five years. The cost for borrowers will depend on factors such as repayment term and risk profile.

Throughout the Summer

These credits will reach the economy with some delay. The government initially aimed for early-year availability and later considered post-Easter timing. Banks have shown understanding but remain cautious. A key speaker noted that the government hoped to start operations in January, but timelines have stretched beyond what stakeholders expected, though the final application deadline of August 31, 2026 for companies remains unchanged. This squeeze reduces the window to deploy funds in a practical sense.

The deputy head of the federation led by major banks like Santander and BBVA described the delay as a response to a complex negotiation with Brussels, calling the postponement understandable. She suggested that credits could start to appear in the market more or less by summer, though the exact timing could slide into early autumn in some scenarios. Several financial insiders even question whether full availability will occur before autumn.

Challenges Ahead

Beyond timing, several hurdles are identified. The leadership emphasizes that loans should fund productive investment rather than mere public spending. A significant portion of funds has previously supported public-interest projects. There is also a notable drop in demand for business credit in recent quarters due to rising interest rates, making it crucial to create or locate enough creditworthy demand to absorb the funds. The European loans will compete with other financing options, so the financial offers must offset the administrative burden with meaningful incentives for firms.

In the same event, the ICO president highlighted that nearly 40.000 million euros represent a meaningful slice of the new corporate lending facilitated by banks in the past two years. He expressed confidence that the loans could reach the economy within the anticipated short window. He noted that while the loans must be formalized by August 31, 2026, disbursements may come later depending on project needs, with recovered funds reinvested through August 2036.

Pros and Cons of Each Line

Abascal, the industry leader, asserted strong support for the Green and Companies and Entrepreneurs lines, also approving a simplified process for projects under 10 million euros that appear on the European environmental positive activity list. However, she warned that misstatements about environmental impact could lead to standard market-rate funding rather than the subsidized European rates. The government is actively inviting third-party verifications to certify green credentials and minimize risk.

The same business leader expressed more skepticism about the housing line due to long amortization periods and higher bank capital needs. The Next-Tech line also faces questions about finding suitable projects. She urged flexibility to reallocate funds if one line underperforms and insisted that sustained credit demand is the real test for overall success.

The ICO chief noted that around 40.000 million euros equals roughly 6% to 8% of the new corporate lending extended by banks in the last two years, reinforcing the belief that the program can reach the market within the planned timeframe. He stressed the need to formalize obligations by the deadline, while disbursements will reflect project schedules, and recoveries can be reinvested in future projects up to 2036.

Line-Specific Outlook

Public sentiment suggests strong optimism for the Green and Companies and Entrepreneurs lines, with hopes that small- to mid-sized projects will benefit from simplified compliance for eligible environmental activities. Companies should be mindful that incorrect environmental declarations could trigger market-rate terms for subsidies. The government is pursuing third-party verification to protect the green claim integrity. Opinions on the housing line reveal more caution, and there is a sense that Next-Tech may struggle to locate adequate projects. Flexibility to reallocate funds remains essential to maintain momentum and ensure demand remains robust.