Spain faced a pivotal moment with the Podemos rejection at the Congress of Deputies regarding unemployment benefit reform. This reform is one of sixty milestones tied to the fourth disbursement of the rescue plan, a prerequisite for unlocking 10 billion euros from the Next Generation EU funds. The government under Pedro Sánchez engaged in bilateral talks with Brussels and local social actors to safeguard access to this tranche.
Brussels initially opted to give the executive some leeway before requesting the payment. Spain now stands in line to gain the fourth installment, with the Community Manager assessing the request. Typically, the evaluation period spans about two months, though delays are possible. For the moment, Brussels has granted a one-month extension, and there is room for further extension due to the Christmas period. A European Commission spokesperson noted that the evaluation period has been extended by one month and might be extended again, a pattern seen in Romania, Bulgaria, Italy and Cyprus in prior requests.
Under this arrangement, Brussels would normally complete its review by the end of March, but that date could shift if Madrid reaches a political agreement. Such an extension would provide additional room for the government to push ahead with unemployment benefits reform, a priority highlighted by Yolanda Díaz, the Vice President for Labor.
Two-way negotiation
Officials stated that discussions with the Commission are ongoing, as has been the case with previous disbursements. Compliance with milestones and goals remains central to this payment, while parallel efforts at the domestic level continue to advance the milestones and targets that must be met, according to the economy minister. When the Eurogroup met, the minister who attended for the first time in that capacity emphasized that both negotiations should progress in parallel, and expressed confidence that the flow of funds into the Spanish economy would continue. The reference to the sixty milestones remains in focus as the process unfolds.
If no agreement is reached before the Commission’s decision, Brussels may approve a partial payment of 10,000 million euros as part of the recovery fund arrangements. The European Commission noted that if all stages and objectives tied to a payment are not satisfactorily met, it may suspend all or part of the financial contribution and, where relevant, the loan. This stance keeps Spain on alert that failure to implement the reforms could trigger a temporary halt in disbursements.
Consequently, if the subsidy reform and unemployment measures are not approved, Brussels could freeze a portion of the amount during its analysis. The suspension would remain in effect for a defined period, after which any released funds would depend on the final approval of the reform. This six-month window provides the Member State with additional time to comply with the required measures while the suspended sums remain in abeyance, a mechanism repeatedly referenced during past reviews. Officials stressed that efforts remain focused on achieving the full payment, though a partial release could be contemplated in the interim.