8EU aid and incentives

8.2 Other aid instruments

Apart from the significant effect that the new European Recovery Instrument will undoubtedly have on the Spanish economy, it is important to remember that the European Union provides States with other resources and funds that can be used to finance the achievement of other objectives considered of interest to the Union. In general, most of this financing (whether in the form of loans or subsidies) supplements the aid programs financed by the Spanish State.

Such aid is routed through the Spanish public authorities and institutions, as well as through finance entities, which act as intermediaries between the granting of aid and beneficiary. Accordingly, the related applications for subsidies must be addressed to these entities, save in the case of the direct aid under, inter alia, programs to support research, development and innovation (R&D&I) for which applications must be submitted in the respective calls for proposals issued directly by the European Commission.

The broad range of aid instruments traditionally at the EU’s disposal includes, most notably the following:

8.2.1. European Investment Bank (EIB)

The European Investment Bank (EIB) grants funding with a threefold objective: to boost Europe’s potential for growth and employment, to support measures aimed at mitigating climate change, and to foster EU policies in other countries.

On these bases, the EIB funds projects that promote the development of less favored regions and those of common interest to several Member States or benefiting the EU as a whole. They are focused mainly on the following 4 areas: (i) innovation (digital transformation and human capital); (ii) small businesses; (iii) infrastructures (sustainable cities and regions), and (iv) climate and the environment (sustainable energy and natural resources)⁴³.

The EIB is jointly owned by the EU countries and borrows money on the capital markets. For this reason, the loans it grants for projects that support EU objectives are not considered funded with money coming from the Union budget.

According to the information published by the EIB, the total amount of financing contributed by the EIB group (European Investment Bank and European Investment Fund) in 2022 was €65.15 billion.⁴⁴

Specifically, the €65.15 billion were allocated to the following objectives:

Also of note last year was the financial contribution that the EIB made to provide urgent aid to Ukraine, by disbursing €1.7 billion in funds to help finance urgent repairs to the country’s infrastructure ravaged by Russian bombing⁴⁵.

Specifically, in Spain, the financing from the EIB during 2022 amounted to €9.961 billion (15.82% of the total), making it the second largest recipient in the EU, together with France, of funding from the EIB Group⁴⁶ this year.

The EIB can lend to both the public and private sectors, supporting small companies (SMEs) through local banks and lending money to innovative start-ups. In addition, mid-cap companies can receive direct support for research and development investments ⁴⁷.

These loans have the following features:

• Attractive pricing with advantageous funding conditions.
• Long terms, matching the economic life of each project, which can sometimes exceed 30 years.
• Coverage of up to 50% of a project’s total cost, with loans starting at €25 million and even lower amounts in some cases.
• Funds to SMEs of up to €12.5 million through intermediated lending partners.
• Financial and technical support for preparation of the project.
• Financing blended with additional sources of investment, such as financial instruments and grants from the EU.
• EIB’s financing acts as a quality stamp that helps the project attract additional investors.
• Loans can be secured or unsecured and provide different levels of subordination and can even be contingent on the company’s growth.

In general, the EIB offers two types of loans:

8.2.1.1 Global loans (“Intermediated loans”)

Global loans are similar to the credit lines granted to financial institutions, which subsequently lend the funds to the final beneficiaries, so that they can make small or medium-scale investments meeting the criteria set by the EIB itself.

This is the main instrument with which the EIB provides support for SMEs and MID-CAPs since, by granting loans to banks or other intermediaries, access to funding is provided indirectly to small and medium-scale business initiatives (although this does not preclude large companies, local and national authorities and other public sector entities from also qualifying for loans this type).

The loans are granted by the EIB to banks or other financial institutions in all the Member States, which act as intermediaries. These financial intermediaries conduct an analysis of the investment, and of the economic, technical and financial viability of each of the projects. They are responsible for granting the loans for small and medium-scale investments and for the administration of such loans.

Specifically in Spain, global loans are routed mainly through, inter alia, Instituto de Crédito Oficial (ICO), Banco Bilbao-Vizcaya Argentaria (BBVA), Santander, Bankinter, Sabadell, Banca March, CAIXABANK, Unicaja, BNP Paribas Leasing Solutions, De Lage Landen International B.V. Sucursal en España, Ibercaja, Institut Català de Finances (ICF), Instituto para la Competitividad Empreserial de Castilla y Leon, Luzaro, Santander Consumer Finance S.A., Unión de Créditos Inmobiliarios, S.A. and Establecimiento Financiero de Crédito (Sole-Shareholder Company)⁴⁸.

There are many different types of loans and credits, with varying maturities, amounts and interest rates, but their general terms can be summarized as follows:

• Coverage of up to 50% of the overall investment costs and, in certain cases, up to 100% of the investment with a guarantee from the intermediary bank.
• Grace period: Up to three years.
• Repayment period: To be determined by the financial institution acting as intermediary and the EIB, although it tends to fluctuate between 2 and 15 years.
• Beneficiaries: Local authorities, SMEs (for these purposes, SMEs are deemed to be companies that have less than 250 workers) or MID-CAPs (which have up to 3,000 workers).
• The amount awarded under a global loan may not exceed €12.5 million, including the possibility of working-capital financing.
• Free of fees and other charges, except for minor administrative expenses.

Applications must be filed with financial institutions or other intermediaries.

8.2.1.2. Loans for individual projects (“Project loans”)

The EIB also grants loans for individual projects with a total investment cost above €25,000,000.

Although the loans can cover up to 50% of the total cost, on average, they tend to cover approximately only a third.

In general, the following are the main characteristics of these loans:

• Public or private investment projects made mainly in the infrastructure, energy efficiency/renewable energies, transport and urban renewal sectors are considered eligible. Nevertheless, research and innovation programs and, in certain cases, medium -capitalization companies with a maximum of 3,000 employees, can also benefit from this form of loan.
• The projects for which an application for financing is presented must fulfil the objectives set by the EIB and be viable from the economic, financial, technical and environmental perspectives. The terms of the financing depend on the type of investment and on the guarantees provided by third parties (banks or banking consortia, other financial institutions or the parent company).
• The interest rate may be fixed, variable, reviewable or convertible (meaning that the calculation formula may be changed during the term of the loan, on certain pre-established dates).
• In some cases, the EIB can apply project evaluation or legal analysis fees, and commitment or non-use fees.
• Most of the loans made by the Bank are denominated in euros (EUR), although they can also operate in other currencies, such as GBP, USD, JPY, SEK, DKK, CHF, PLN, CZK and HUF, etc.
• As a general rule, these loans are repaid in half-yearly or yearly instalments. Grace periods may be granted with respect to the repayment of principal throughout the construction period of the project.

A project financed by the EIB usually goes through 7 major stages: proposal, appraisal, approval, signature, disbursement, monitoring and repayment.

Operating scheme:

Currently, and within the new Community budgetary framework (2021-2017) approved by Regulation 2020/2093, of 17 December 2020, the Commission is proposing to build on the success of the European Fund for Strategic Investments (EFSI) model and benefitting from economies of scale generated by it by merging all instruments currently available to foster investment in the EU, similarly to what it proposed previously, with the creation of the “InvestEU” program to bring EU budget financing in the form of loans and guarantees under one roof.⁴⁹

In accordance with the proposal, the EU budget will provide a guarantee of €38 billion to support strategically significant projects throughout the EU within the 2021-2027 period, although it can be increased by contributions from the EU Member States and third countries.

This program consists of:

1. The InvestEU Fund (which combines the EFSI and 13 other – formerly independently managed – EU financial instruments and is expected to stimulate more than €372 billion of public and private investment) provides an EU guarantee to support financing of and investment in internal EU policies; and all the above with the aim of mobilizing the necessary public and private investment with which to overcome the current investment gap in Europe.
2. The InvestEU Advisory Hub, which builds on the success of the European Investment Advisory Hub and acts as the central entry point for project promoters and intermediaries seeking advisory support and technical assistance for the identification, preparation and development of investment projects across the European Union.

   Although the Hub will be managed by the European Commission, the EIB will remain its strategic partner, providing advisory support in all four areas, as well as some cross-sectoral activities, including the continuation of the JASPERS⁵⁰ program and support for the Just Transition Mechanism.

   With the InvestEU Advisory Hub, the Commission seeks to integrate the 13 currently available advisory services into a one-stop shop to support project development. Its aim is to provide technical support and assistance to help with the preparation, development, structuring and implementation of projects, including additional information on investment guidelines. It is available to public and private project promoters, including SMEs and start-ups.

3. The InvestEU Portal,is an easily accessible and user-friendly database that provides a channel for promoters seeking finance to make their projects visible to potential investors who might not otherwise be reachable.

The InvestEU Fund supports the following 4 policy windows:

1. Sustainable infrastructure: to finance projects in, among others, renewable energy, digital connectivity, transportation, circular economy, water management, waste management and environmental protection infrastructure.
2. Research, innovation and digitalization: aimed at promoting projects in research and innovation, digitalization of industry, artificial intelligence, etc.
3. Facilitating access to funding for small and medium-sized enterprises (SMEs), including, in particular, capital support for enterprises that were adversely affected by the COVID-19 crisis.
4. Social investment and skills, to finance projects in such areas as education, training, housing, schools, universities, hospitals, health care, long-term care and accessibility, social entrepreneurship, migrant integration, refugees and vulnerable people.

To ensure a swift rollout and its local reach, InvestEU will be implemented in conjunction with the EIB and the European Investment Fund (EIF), as well as with other implementation partners such as international financial institutions and national development banks and institutions such as the European Bank for Reconstruction and Development (EBRD), the World Bank, the Council of Europe Bank and national banks.

8.2.2 European Investment Fund (EIF)

The EIF is an EU body which specializes in providing guarantee and venture capital instruments to SMEs for better access to funding. Its principal shareholder is the EIB itself, although the European Commission and a wide range of financial institutions across Europe also own holdings in its capital stock.

It uses, for its activities, equity capital or funds provided by the EIB or the European Union, the Member States, or other third parties.

It is neither a lending institution nor does it provide subsidies to enterprises or directly invest in them. All of its work is carried out through banks and other financial intermediaries. Moreover, it ensures the continuity required in the management of EU programs and has accumulated extensive experience in this area.

The EIF was created for purpose of fostering EU objectives, particularly in the areas of entrepreneurship, growth, innovation, research and development, employment and regional development. Today, the core mission of the EIF is to provide support to SMEs and grant them access to funding at a time of reduced financing granted by credit institutions. To meet this objective, and according to the needs of each regional market, the EIF designs innovative financial products aimed at its partners.

The work of the EIF can be classed according to the financial products (capital and debt) offered, which include most notably:

• Equity products: The EIF invests in venture capital and growth funds, mezzanine funds that support SMEs.
• Debt products: In these cases, the EIF provides security and credit enhancements to financial intermediaries to facilitate the flow of funds from financial institutions to SMEs.
• Inclusive finance: The EIF provides funding (equity and loans), guarantees and technical assistance to micro-credit providers.

Indeed, although the EIF mainly uses venture capital instruments as a means of making capital more available to high-growth innovative SMEs, the Fund also offers debt instruments, having found that many SMEs seek financing through this more traditional route. From this standpoint, the EIF offers security and credit enhancements by means of the securitization of credit, in order to improve the lending capacity of financial intermediaries and, as a result, and ultimately, the availability and terms of the debt for the SME beneficiaries.

The following table summarizes the main instruments and initiatives promoted by the EIF and the potential beneficiaries thereof:

8.2.3 European Structural and Investment Funds

During the new 2021-2027 period, and notwithstanding what ultimately results from the final approval of the relevant legislative instruments, the Union’s regional and cohesion policy will focus on 5 priorities:

• A smarter Europe, through innovation, digitalization, economic transformation and achieving regional connectivity through information and communications technologies.
• A greener, carbon free Europe, implementing the Paris Agreement and investment in energy transition, renewables and the fight against climate change.
• A more connected Europe, enhancing mobility with strategic transport and digital networks.
• A more social and inclusive Europe, delivering on the European Pillar of Social Rights and supporting quality employment, education, skills, social inclusion and equal access to healthcare.
• A Europe closer to citizens, by fostering the sustainable and integrated development of all types of territories and local initiatives.

To achieve these aims, 65% to 85% of ERDF and Cohesion Fund resources will be allocated, depending on Member States’ relative wealth.

The Cohesion Policy will keep on investing in all regions, still on the basis of the 3 categories applied during the 2014-2020 period (less-developed, transition, more-developed). Similarly, the allocation method for the funds is still largely based on GDP per capita, although new criteria are added, such as youth unemployment, low education level, climate change, and the reception and integration of migrants, to better reflect the reality on the ground. Outermost regions are also expected to continue benefitting from special EU support.⁵¹.

Likewise, the Cohesion Policy will continue to support locally-led development strategies, encouraging local authorities to play a more prominent role in the management of funds. the urban dimension of the Cohesion Policy is stepped up with 6% of the ERDF dedicated to sustainable urban development. Along the same lines, it includes a new networking and capacity-building program for urban authorities known as the “European Urban Initiative”.

8.2.3.1 Common provisions on the European Structural and Investment Funds (ESI Funds)

The basic rules governing the ESI Funds are contained in Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common provisions on the European Regional Development Fund (ERDF), the European Social Fund Plus (ESF+), the Cohesion Fund (CF), the Just Transition Fund (JTF) and the European Maritime, Fisheries and Aquaculture Fund (EMFAF) and financial rules for those and for the Asylum, Migration and Integration Fund (AMIF), the Internal Security Fund (ISF) and the Instrument for Financial Support for Border Management and Visa Policy (BMVI).

Each Fund also has its own regulation: ERDF (Regulation (UE) 2021/1058), ESF (Regulation (EU) 2021/1057), JTF (Regulation (EU) 2021/1056), and EMFAF (Regulation (EU) 2021/1139), which lay down the specific rules supplementing those laid down in the Common Provisions Regulation.

As in previous periods, the programming for the ESI Funds for the new 2021-2027 framework also requires the preparation and approval of the respective Partnership Agreement and the corresponding Operational Programs.

The Partnership Agreement is the national document prepared by each Member State, which explains the investment strategy and priorities of the respective Funds (ERDF, ESF, EAFRD and EMFF) in such State and must be approved by the Commission. Such strategy must be based on a previous analysis of the current situation of the Member State and its regions, in particular (i) the disparities existing between those regions, (ii) the opportunities for growth and (iii) the weaknesses of all its regions and territories, focusing on the thematic objectives, which will entail the identification of the actions in the State in question which are to be treated as priorities by each of the ESI Funds.

In the case of Spain, the Partnership Agreement for the period 2021-2027 was ratified on November 18, 2022. It is a strategic document that sets out the broad areas of action and investment priorities of all the European Funds comprising the Multiannual Financial Framework (specifically, the European Regional Development Fund, European Social Fund Plus, the European Maritime, Fisheries and Aquaculture Fund (EMFAF), and the Just Transition Fund (JTF).

The total volume of the investment is €36.682 billion and its implementation supplements the objectives and milestones already included in the above-mentioned Recovery, Transformation and Resilience Plan (RTRP) approved for Spain. It is worth noting that of the €36.682 billion to be contributed by the EU under the Partnership Agreement, €35.562 million correspond to EU cohesion policy funds, where Spain is the third biggest recipient in the 2021-2027 period, only behind Poland and Italy. This allocation is split into €23.397 billion from ERDF, €11.296 billion from ESF+ and €869 million from JTF. In addition to these amounts, €1.12 billion have been allocated to Spain for the EMFAF.

The funding relates to five major policy areas, including most notably support for research, digitalization, support for SMEs, energy efficiency, the green transition and social investment⁵². Specifically:

• Policy Objective 1 (PO1) will have nearly €8.3 billion in European aid to strengthen research, support businesses and promote the digitalization of the Spanish
  economy.
• Policy Objective 2 (PO2) will allocate more than €9.9 billion to improving energy efficiency, rolling out renewable energy projects, climate change adaptation actions, implementing a circular economy model and focusing on biodiversity.
• Policy Objective 3 (PO3) has an allocation of €1.2 billion, which focuses on the development of rail corridors, on ensuring rail accessibility to ports of general interest and on supporting the use of clean vehicles and improving the public transport service.
• Within Policy Objective 4, (PO4), social investment takes on special significance with attention to employment, education, occupational training, inclusion and the fight against poverty and child poverty. This translates into €12.3 billion in aid aimed at fostering social cohesion.
• Lastly, Policy Objective 5 (PO5) includes funding aimed at promoting the implementation of urban and non-urban development initiatives through the design of integrated investment programs, with an amount totaling more than €2.1 billion.

As already noted above, the material implementation of the Funds also requires the approval of the corresponding Operational Programs (i) prepared by each Member State in accordance with the terms of the Partnership Agreement and (ii) presented to the Commission for its approval.

Each Program will define priorities and proposals for action, specifying the projected investment and breaking it down by each of the years of the period in which it is applied.

8.2.3.2 Funds under the Cohesion Policy: ERDF, ESF+, Cohesion Fund and Just Transition Fund (JTF)

The Funds under the Cohesion Policy include Structural Funds (ERDF and ESF+), the Cohesion Fund and the Just Transition, which contribute to enhancing economic, societal and territorial cohesion.

• European Regional Development Fund (ERDF)

  This Fund contributes to the funding of measures adopted in order to enhance economic, societal and territorial cohesion by correcting the Union’s main regional imbalances, through (i) sustainable development and the structural adjustment of regional economies, and (ii) by restructuring industrial regions in decline and less developed regions.

  The ERDF Regulation for the 2021-2017 period maintains its two fundamental goals: “Investment for jobs and growth” and “European territorial cooperation”. It also maintains its traditional priorities such as support for innovation, the digital economy and SMEs delivered through a smart specialization strategy, and a greener, low-carbon and circular economy⁵³.

  However, the cohesion policy applicable during this period also introduces a list of activities that are not to be supported by the ERDF, including the decommissioning or construction of nuclear power stations, airport infrastructure (except in the outermost regions) and some waste management operations (e.g. landfill).

  For the 2021-2027 programming period, the ERDF has around €200.36 billion (including €8 billion for European Territorial Cooperation and €1.93 billion for the outermost regions). Less-developed regions will benefit from co-financing rates of up to 85% of the eligible cost of the projects, whereas co-financing rates for transition regions and for more-developed regions will be up to 60% and 40% respectively.

  Over the 2021-2027 period, Spain will receive €23,539 million from the ERDF, which will be distributed via 19 Regional Programs (1 for each autonomous community and city) and one Multi-regional Program, which will serve as the main instrument for planning the Central Government initiatives to be financed via this Fund⁵⁴.

  Accordingly, based on the provisions of article 108 of the Common Provisions Regulation, the following regions may be differentiated:

  • Less developed regions: Regions whose GDP per capita is less than 75% of the average GDP per capita of the EU-27, which in Spain includes the autonomous communities of Andalucía, Castilla La Mancha, Ceuta, Extremadura and Melilla.
  • Transition regions: Regions whose GDP per capita is between 75% and 100% of the average GDP per capita of the EU-27, and which, during this period, corresponds to the autonomous communities of Asturias, Balearic Islands, Canary Islands, Cantabria, Castilla León, Galicia, La Rioja, Murcia, Valencia).
  • More developed regions: that is, regions whose GDP per capita is above 100% of the average GDP per capita of the EU-27, which in Spain corresponds to Aragón, Cataluña, Navarra, Madrid, Basque Country.

    Both the ERDF Spain Interregional Program 2021-2027 and all the Regional Programs that will apply during that period in all the above-mentioned autonomous communities and autonomous cities have already been published. The programs set out the priorities and conditions required for projects and initiatives to receive co-financing from the ERDF.

    For more detailed information on the contents of the respective programs, please see the website.

• European Social Fund (ESF+)

  The specific objectives of the ESF+ during the 2021-2027 period include:⁵⁵

  • Supporting the policy areas of employment and labor mobility, education and social inclusion, namely by helping to eradicate poverty, and thereby contributing to the implementation of the European Pillar for Social Rights.
  • Supporting the digital and green transitions, job creation through Skills for Smart Specialization, and improvements to education and training systems.
  • Supporting temporary measures in exceptional or unusual circumstances (e.g., financing short-time work schemes without requiring them to be combined with active measures, or providing access to healthcare, including for people who are not immediately socio-economically vulnerable).
• Cohesion Fund

  The Cohesion Fund will continue to support projects under the ‘Investment for growth and jobs’ goal, mainly for environmental and transport infrastructure projects, including trans-European networks (TEN-T).

  In addition, the Cohesion Fund will support two specific objectives of the new cohesion policy: a greener, low-carbon and circular economy (PO2); and a more connected Europe (PO3).⁵⁶

• Just Transition Fund

  The Just Transition Fund is a new financial instrument within the Cohesion Policy which aims to provide support to territories facing serious socio-economic challenges arising from the transition towards climate neutrality. It is conceived as a specific instrument to facilitate the implementation of the European Green Deal, which aims to make the EU climate-neutral by 2050.

  Specifically, the Just Transition Fund is a key tool for supporting the territories most affected by the transition towards climate neutrality and for preventing an increase in regional disparities. Its main objectives are to alleviate the impact of the transition by financing the diversification and modernization of the local economy and by mitigating the negative repercussions on employment. In order to achieve its objective, the Just Transition Fund supports investments in areas such as digital connectivity, clean energy technologies, the reduction of emissions, the regeneration of industrial sites, the reskilling of workers and technical assistance.

  The Just Transition Fund is implemented under shared management rules, which means close cooperation with national, regional and local authorities. In order to access Just Transition Fund support, Member States have to submit territorial just transition plans. These plans outline the specific intervention areas, based on the economic and social impacts of the transition. In particular, these plans have to take account of expected job losses and the transformation of the production processes of the industrial facilities with the highest greenhouse gas intensities⁵⁷.

  The Just Transition Fund has an overall budget of €17.5 billion for 2021-2027, of which €7.5 billion come from the multiannual financial framework and €10 billion are additional funds from the NextGenerationEU framework.

8.2.4. The funding policy of the Common Agricultural Policy (CAP)

The Common Agricultural Policy (CAP) absorbed around 40% of the total budget of the EU for the 2014-2020 period. Despite its heavy budgetary weight, justified in part by its being one of the few sectors whose policy is financed principally by the EU, its importance in economic terms has been reduced substantially over the last 30 years, dropping from 75% to the current 40%. The budget for direct payments assigned to Spain in that period is equal to €29,227,900,000,000, which entailed 11.56% of the total.

The financing and functioning of the CAP is currently regulated under Regulation 2116/2021, of 2 December 2021, of the European Parliament and of the Council, on the financing, management and monitoring of the Common Agricultural Policy and repealing Regulation 1306/2022 (which had the same purpose).

The new CAP, which will apply from 2023 to 2027, retains the essential elements of the former CAP, but goes from being a policy based on the description of the requirements to be met by the final beneficiaries of the aid to a policy aimed at achieving specific results, linked to three general objectives:

1. To foster a smart, competitive, resilient and diversified agricultural sector that ensures long-term food security.
2. To support and bolster environmental care and climate action and contribute to the achievement of EU environmental and climate objectives, including the commitments made under the Paris Agreement.
3. To strengthen the socio-economic fabric of rural areas.

These general objectives are in turn broken down into nine specific objectives, based on the three pillars of sustainability and supplemented by a common crosscutting objective of modernizing the agricultural sector through knowledge, innovation and digitalization in rural areas.

One of the main new features of the 2023-2027 CAP is that all the Member States must have in place a CAP Strategic Plan that sets out the interventions or measures with which they intend to achieve the objectives of the CAP and the European Green Deal. This enables the CAP to be better serve Europe’s present and future challenges, such as climate change or generational renewal, without ceasing to support farms in order to achieve a sustainable and competitive agricultural sector.

Accordingly, Spain has a CAP Strategic Plan (CAPSP), which was approved by the Commission on August 31, 2022 and has a budget of €32.549 billion for the entire period⁵⁸. Likewise, and to facilitate its implementation, the Spanish government has approved Royal Decree 1048/2022, of December 27, 2022, on the application, from 2023 onward, of interventions in the form of direct payments and the establishment of common requirements within the context of the CAP Strategic Plan and the regulation of the single application of the integrated management and control system.

That said, it is worth recalling that CAP financing is essentially structured – through two funds included in the EU budget – around two structural pillars:

1. The first pillar, through the European Agricultural Guarantee Fund (EAGF), providing direct support to farmers and funding market measures covered in their entirety and, exclusively, by the EU budget, with a view to guaranteeing the application of a common policy throughout the single market and with the integrated management and control system.
2. The second pillar, through the European Agricultural Fund for Rural Development (EAFRD), improving the competitiveness of agricultural and forestry industries and promoting the diversification of economic activity and quality of life in rural areas, including regions with specific problems, based on measures co-funded with the Member States.

The following is a description of the main characteristics of these two Funds:

1. EAGF

In general, the EAGF funds the following actions, managed jointly by the Member States and the Commission:

• Measures aimed at regulating or supporting agricultural markets.
• Direct payments to farmers established within the scope of the CAP.
• The financial participation of the Union in the measures taken by Member States to report and promote agricultural products on the Community domestic market and in third countries.
• The financial participation of the Union in the Union school fruit and vegetable scheme.

In turn, the EAFRD provides direct funding for the following expenditure:

• Promotion of agricultural products, undertaken either directly by the Commission or through international organizations.
• Measures to ensure the conservation, characterization, collection and utilization of genetic resources in agriculture.
• The establishment and maintenance of agricultural accounting information systems.

The Commission provides Member States with the credit necessary to cover the expenses financed by the EAGF, in the form of monthly reimbursements.

2. EAFRD

In the field of local development, consideration must be given to Regulation 2115/2021, of 2 December 2021, of the European Parliament and of the Council, establishing rules on support for strategic plans to be drawn up by Member States under the common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulations (EU) No 1305/2013 and (EU) No 1307/2013.

In accordance with that Regulation which, although it maintains the essential elements of the former Regulation, it goes from being based on the mere description of the requirements that are to be met by the final beneficiaries of the aid, to a policy aimed at obtaining specific results linked to 3 general objectives:

1. Fostering an intelligent, resilient and diversified agricultural industry that guarantees food safety.
2. Intensifying environmental care and pro-climate action, contributing to reaching the EU’s climate and environmental goals.
3. Strengthening the socio-economic fabric of rural areas.

These general objectives are in turn broken down into nine specific objectives, based on the three sustainability pillars and complemented by the cross-cutting objective of modernizing the sector by fostering knowledge, innovation and digitalization in rural areas. Specifically, the EAFRD establishes the following 9 specific objectives:

1. To support viable farm income and resilience of the agricultural sector in order to enhance food security and agricultural diversity as well as to ensure the economic sustainability of agricultural production.
2. To enhance market orientation and increase farm competitiveness.
3. To improve the farmers’ position in the value chain.
4. To contribute to climate change mitigation and adaptation.
5. To foster sustainable development and efficient management of natural resources.
6. To contribute to halting and reversing biodiversity loss, enhance ecosystem services and preserve habitats and landscapes.
7. To attract and sustain young farmers and new farmers and facilitate sustainable business development in rural areas.
8. To promote employment, growth, gender equality, social inclusion and local development in rural areas, including the circular bio-economy and sustainable forestry.
9. To improve the response of Union agriculture to societal demands on food and health.

In accordance with the above-mentioned Regulation No 2115/2021, the maximum aid allocated to Spain and earmarked for rural development will be €4,874,879,750 in 2023, €4,882,179,366 in 2024, €4,889,478,982 in 2025, €4,896,778,599 in 2026 and €4,896,778,599 in 2027.

8.2.5. European Maritime and Fisheries Fund (EMFF)

During the 2014-2020 period, a new Fund was created to finance EU policies to support the maritime and fishery sector known as the European Maritime and Fisheries Fund (EMFF) and regulated in Regulation (EU) No 508/2014, of 15 May 2014, of the European Parliament and of the Council⁵⁹.

However, for the new 2021-2027 budgetary framework, the European Maritime, Fisheries and Aquaculture Fund Regulation (EMFAF) has been approved to replace the former EMFF, and is governed, in general, by Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 and, specifically, by Regulation (EU) 2021/1139 of the European Parliament and of the Council of 7 July 2021.

In particular, the EMFAF includes a budget of €6,108 million, which, in accordance with article 3 of Regulation (EU) No. 2021/1139, will be used to pursue the following priorities:

1. Promote sustainable fishing and the conservation of aquatic marine biological resources, by fostering:
   • Economically, socially and environmentally sustainable fishing activities.
   • Energy efficiency and reducing CO2 emissions through the replacement or modernization of engines of fishing vessels.
   • The adjustment of fishing capacity to fishing opportunities in cases of permanent cessation of fishing activities and contributing to a fair standard of living in cases of temporary cessation of fishing activities.
   • Control and enforcement, including fighting against IUU fishing, as well as reliable data for knowledge-based decision making.
   • A level-playing field for fishery and aquaculture products from the outermost regions.
   • The protection and restoration of aquatic biodiversity and ecosystems.
2. Contribute to EU food safety through aquaculture and sustainable and competitive markets, including the following support measures:
   • Sustainable aquaculture activities, especially strengthening the competitiveness of aquaculture production, while ensuring that the activities are environmentally sustainable in the long term.
   • Initiatives aimed at marketing, quality and added value of fishery and aquaculture products, as well as processing of those products.
3. Enable the growth of a sustainable blue economy and to develop prosperous coastal communities, through both the sustainable development of local economies and communities through community-led development and through the collection, management and use of data to improve knowledge of the status of the marine environment.
4. Strengthen the international governance of oceans and to guarantee protected, safe, clean and sustainably managed seas and oceans, establishing maritime surveillance and cooperation mechanisms between coastguards.

8.2.6. European Union Research and Innovation Programs

8.2.6.1. Horizon Europe

The EU has been approving successive multi-year programs which set out the lines of action of the Community research and innovation policy, allocating considerable economic resources to their performance.

The EU Research and Innovation Programme for the 2014-2020 period was called “Horizon 2020” and was regulated by Regulation (EU) No 1291/2013 of the European Parliament and of the Council, of 11 December 2013.

The objective of the program was none other than to contribute to building a society and an economy based on knowledge and innovation across the Union mobilizing, for this purpose, financing aimed at attaining, over this period, a target of 3% of GDP used to promote research, development and innovation (R&D&I) throughout the EU.

This program had a total budget of 74,828.3 million euros to finance research, technological development and innovation initiatives and projects with obvious European added value.

Horizon 2020 was based on three fundamental pillars: (i) Excellent science, to increase the level of excellence in European basic science and ensure a steady flow of quality research to ensure Europe’s long-term competitiveness; (ii) Industrial leadership, to speed up the development of technologies and innovations that underpin tomorrow’s new technology and help innovate European SMEs to grow into world-leading companies; and (iii) Societal challenges, focused on researching big issues affecting European citizens.

With respect to funding, most of the activities were instrumented as competitive tenders in “Horizon 2020” managed by the European Commission with pre-established priorities in the respective working programs which were previously published.

In general, any European enterprise, university, research center or legal entity that wished to develop a R&D&I project, provided that its content was consistent with the lines and priorities stipulated in any of the pillars of “Horizon 2020” could participate in the calls.

To be able to participate in most of the actions included in this program, it was developed through consortium projects, which had to involve at least 3 independent legal entities, each one established in a different EU Member State or associated state.

Once the former Horizon 2020 Program concluded, a new European Union Investment and Innovation Framework Program was approved, which is known as “Horizon Europe” and will cover the new 2021-2017 budget period. This Program is governed by Regulation (EU) of the European Parliament and of the Council of 28 April 2021, and its Specific Program whereby it is implemented is established by Council Decision (EU) 2021/764 of 10 May 2021.

Horizon Europe is endowed with a total budget of €94,076 million, which entails a budgetary increase of roughly 50% compared to Horizon 2020, making Horizon Europe the biggest European research and innovation program approved to date.

According to the Regulation (EU) 2021/1695, the general objective of Horizon Europe will be (i) to deliver scientific, economic and social impact by investing in research and innovation, in order to strengthen its scientific and technological bases and boost its competitiveness, including that of its industries; (ii) deliver on the Union’s strategic priorities and (iii) address global challenges, including sustainable development objectives.

In particular, the program has the following specific objectives:

• To support the creation and diffusion of high-quality new knowledge, skills, technologies and solutions to global challenges.
• To strengthen the impact of research and innovation in developing, supporting and implementing Union policies, and support the uptake of innovative solutions in industry and society to address global challenges.
• To foster all forms of innovation, including breakthrough innovation, and strengthen market deployment of innovative solutions.
• To optimize the Program's delivery for increased impact within a strengthened European Research Area.

To this end, according to the Regulation (EU) 2021/1695, Horizon Europe will be structured into four pillars and budgets:

1. “Excellent science”, which has a budget of €23,546 million and comprises (i) the European Research Council, for pioneering research conducted by the best researchers and teams; (ii) the Marie Skłodowska-Curie Actions, to provide researchers with new knowledge and skills through mobility and training; and (iii) research infrastructure.
2. “Global Challenges and European Industrial Competitiveness”, which has a budget of €47,428 million and consists of the following clusters: “Health”, “Culture, creativity and inclusive society”, “Civil security for society”, “Digital, industry and space”, “Climate, energy and mobility”, and “Food, bioeconomy, natural resources, agriculture and environment”, as well as non-nuclear direct actions of the Joint Research Center (JRC).
3. “Innovative Europe”, which has a budget of €11,937 million and will comprise (i) the European Innovation Council, to support innovations with breakthrough and market creating potential; (ii) European innovation ecosystems, aimed at connecting regional and innovation actors; and (iii) the European Institute of Innovation and Technology (EIT), aimed at bringing key actors (research, education and business) together around a common goal for nurturing innovation.
4. “Widening Participation and Strengthening the European Research Area”, which has a budget of €3.212 billion and includes (i) widening participation and spreading excellence; and (ii) reforming and enhancing the European R&I system.

In diagram form, the structure of Horizon Europe is as follows:

The main new features introduced by Horizon Europe stem from some of the lessons learned from the interim evaluation of Horizon 2020, such as the following:

• The European Innovation Council, will take on a greater role to support innovations with breakthrough and disruptive nature and scale-up potential that are too risky for private investors. To this end, provision is made both for (i) grants from early technology phase to proof of concept; and (ii) grants from proof of concept to the pre-commercial phase; and (iii) grants and blended finance from pre-commercial phase to market and scale-up phase.
• Fostering the execution of research and innovation missions, to relate EU’s research and innovation better to society and citizens’ needs, with better visibility and impact. These specific missions will be programmed within the “Global challenges and European industrial competitiveness” pillar.
• The strengthening of international cooperation, opening the program to association with third countries and territories that have (i) good capacity in science, technology and innovation; and (ii) the commitment to an open market economy within a predetermined legislative framework, including fair and equitable dealing with intellectual property rights, backed by democratic institutions.
• A policy of “open science”, so that, in in general, (i) open access to scientific publications resulting from research funded under the Program shall be ensured; (ii) responsible management of research data shall be ensured in line with the FAIR principles; and (iii) open science practices beyond open access to research outputs and responsible management of research data shall be promoted.

  To this end, (i) beneficiaries shall ensure that they or the authors retain sufficient intellectual property rights to comply with open access requirements; and (ii) open access to research data shall be the general rule, but exceptions shall apply if justified, taking into consideration the legitimate interests of the beneficiaries and any other constraints, such as data protection rules, security rules or intellectual property rights.

• A new approach to European partnerships, to rationalize the funding landscape. These partnerships can take the following forms: (i) Co-programmed European Partnerships (on the basis of memoranda of understanding or contractual arrangements between the Commission and the partners); (ii) Co-funded European Partnerships (based on the commitment of the partners for financial and in-kind contributions); or (iii) Institutionalized European Partnerships (with research and innovation programs undertaken by several Member States or by bodies, such as joint undertakings or by knowledge and innovation communities).
• The spreading of excellence, (i) establishing it as a possible criterion for awarding subsidies and as the sole criterion in the case of actions by the European Research Council with respect to “knowledge frontiers”; and (ii) creating a seal of excellence to which certain beneficiaries can aspire.

8.2.6.2. Other Research and Innovation Programs

Parallel to “Horizon Europe”, the European Commission also extends R&D&I funding opportunities through other additional programs of significance in the context of the European Research and Innovation Strategy, such as the COST (European Cooperation in Science and Technology) program, initiated in 1971 and one of the oldest European framework programs supporting cooperation among scientists in all of Europe in different areas of research, and the EURATOM, (European Atomic Energy Community) program, with the goal of coordinating the research programs of Member States in the peaceful use of nuclear energy.

• COST Program

  The COST (European Cooperation in Science and Technology) program is the first, and one of the largest, intergovernmental network for the coordination of scientific and technical research at European level, and currently involves 41 countries and Israel as a cooperating State and South Africa as a partner State. It also has a multitude of reciprocity agreements (including Australia, New Zealand, Argentina, Mexico, Brazil, the US, China, and Japan⁶⁰).

  

  Source: https://www.cost.eu/who-we-are/members/

  This program is targeted at researchers who work (i) in universities and research centers, regardless of size, both public and private, in any of the 38 COST countries or Israel and South Africa; (ii) in any technological or scientific field; and (iii) provided that they have an original and innovative idea.

  Its objective is to strengthen scientific and technical research in Europe, financing the establishment of cooperation and interaction networks between researchers who organize themselves around a specific scientific objective.

  The program functions through networks known as COST Actions, which emerge at the initiative of researchers without pre-defined thematic priorities. At least 7 participants from different COST countries must join together in order to apply for an Action, at least four of which must be from COST Inclusiveness Target Countries.

  The projects selected will receive funding for activities previously established in the joint working program – with a four-year term – from among the following:

  • Scientific meetings of working groups.
  • Workshops and seminars.
  • Short-term Scientific Missions (STSMs).
  • Training workshops and scientific conferences.
  • Dissemination publications and activities.

  COST calls for proposals are permanently open, with two submission deadlines per year (spring and autumn). The procedure for selection and grant of aid is carried out in accordance with the following scheme.

  
  Source: http://eshorizonte2020.es/content/download/23551/278009/file/Presentación%20COST%20junio%202013.pdf

  Currently, there is an open call for proposals for COST actions that will end in October, and a new call is expected for autumn 2024.

  Spain is one of the countries which is most active in COST, since it is present in more than 300 actions, approximately, which makes it number three in the ranking of countries with the highest number of participants.

  The representative of Spain in the COST program (delegate in the committee of senior officials, CSO, and COST National Coordinator, CNC) is the Ministry of Science and Innovation through the Subdirectorate-General of International Relations.

  Each country’s participation in COST actions:

8.2.7 Community initiatives in favor of corporate finance

The Community initiatives aimed at favoring corporate finance include most notably the COSME program and the Gate2Growth initiative:

• COSME Program:

  The COSME (Competitiveness of Enterprises and Small and Medium-sized Enterprises) program was an EU program aimed at improving the competitiveness of enterprises, with special emphasis on small and medium-sized enterprises, during the 2014-2020 period, which has already ended.

  COSME helped entrepreneurs and small and medium-sized enterprises to begin to operate, access financing and internationalize, in addition to supporting the authorities in the improvement of the business environment and boosting economic growth in the European Union. It was regulated in Regulation (EU) nº 1287/2013 of the European Parliament and of the Council, of 11 December 2013.

  COSME had a budget of approximately €2.3 billion and supplemented the policies implemented by the Member States themselves in their support of SMEs, helping to strengthen the competitiveness and sustainability of the Union’s enterprises and encouraging entrepreneurial culture.

  The program’s objectives were (i) to improve SMEs’ access to finance and to markets; (ii) to improve the general conditions for the competitiveness and sustainability of SMEs; and (iii) to promote entrepreneurship and entrepreneurial culture.

  In addition to supporting internationalization, competitiveness and entrepreneurial culture, COSME was, above all, a financial instrument which will made it possible to improve a SME’s access to financing, since at least 60% of the program’s total budget (€1.4 billion) is earmarked for this purposes.

  For the 2021-2027 period, the objectives and aims pursued by COSME will be implemented via the following two programs⁶²:

  1. Single market program, specially dedicated to empowering and protecting consumers and enabling Europe's many SMEs to take full advantage of a well-functioning single market. To this end, the governance of the EU's internal market will be strengthened, thereby supporting businesses’ competitiveness, promoting human, animal and plant health and animal welfare, as well as establishing the framework for financing European statistics⁷⁵. It is a modern, simple and flexible program which consolidates a large range of activities that were previously financed separately, into one coherent program.

     This program is governed by Regulation (EU) 2021/690, of 18 April 2021, of the European Parliament and of the Council, which endows it with a budget of €4,208,041,000.

     The general aims of the Single Market Program are to:

     • Improve the functioning of the internal market, notably to protect and empower the public, consumers and businesses, especially SMEs, by enforcing EU law, facilitating market access and setting standards, promoting human, animal and plant health and animal welfare. And all of the above, while respecting sustainable development and ensuring a high level of consumer protection, as well as enhancing cooperation between national authorities, the European Commission and decentralized EU agencies.
     • Develop, produce and disseminate high-quality, comparable, timely and reliable European statistics to underpin the design, monitoring and evaluation of EU policies assist the public, policymakers, authorities, businesses, academia and the media to make informed decisions help the above groups to participate actively in the democratic process.
  2. InvestEU Fund, governed by Regulation (EU) 2021/523, of 24 March 2021, of the European Parliament and of the Council. It is a program endowed with a budgetary guarantee of approximately €26.15 billion, although it is expected to mobilize more than €372 billion in investments during the 2021-2027 period (as referred to above in the section on the European Investment Bank).

     It is structured around four policy windows: (i) sustainable infrastructure; (ii) research, innovation and digitalization; (iii) SMEs; and (iv) social investment and skills.

     Strategic investments focusing on building stronger European value chains as well as supporting activities in critical infrastructure and technologies will be possible under all four windows. With this, the aim is to cater for the future needs of the European economy and promote the EU's autonomy in key sectors.

• InvestorNet - Gate2Growth initiative

  The InvestorNet - Gate2Growth initiative (www.gate2growth.com) is a one-stop shop for innovative entrepreneurs seeking financing. It also offers investors, intermediaries and innovation service-providers, a community for sharing knowledge and good practice.

  The initiative has incorporated all knowledge acquired through the implementation of previous pilot programs, some of the most noteworthy of which are the I-TEC project, the LIFT project and the FIT project.

  One of the most notable characteristics of this initiative is that it acts as a meeting point for innovative entrepreneurs, innovation professionals and potential investors. InvestorNet – Gate2Growth aids innovative European companies with the processes of marketing, internationalization and financial growth, by:

  • Being a partner in commercialization and value chain modeling.
  • Consulting in term-sheet and shareholder agreement negotiations.
  • Raising capital for high-tech ventures and public-private partnerships.
  • Finding strategic partnerships for investments from universities and research institutions.
  • Conducting master class in “How to Attract Investors”, “SME Instrument” and ”Train the Trainers in How to Attract Investors”.

  Many projects have been executed within the framework of the InvestorNet - Gate2Growth initiative, including most notably the following:

  • NICE: Innovative and enhanced nature-based solutions for a sustainable urban water cycle (2021-2025).
  • LIBERATE: Lignin biorefinery approach using electrochemical flow (2018-2021).
  • CIRCLES: The control of microbiomes-tailored circular actions to enhance food systems (2018-2023).
  • DEEP PURPLE: Conversion of diluted mixed urban bio-wastes into sustainable materials and projects in flexible purple photobiorefineries.
  • GO GRASS: Grass-based circular business models for rural agri-food value chains (2019-2023).
  • SEALIVE: Circular economic strategies and advanced bio-based solutions to keep land and sea free from plastics contamination (2019-2023).
  • NewTechAqua: New technologies, tools and strategies for a sustainable, resilient and innovative European Aquaculture (2020-2023).
  • ROTATE: Critical and essential raw materials for circular ecology (2022-2026).
  • TRIGGER: Solutions to mitigate climate-induced health threats (2022-2026).
  • InvestCEC: It seeks to boost investors’ trust in circular economy projects and foster the regional adoption of circular solutions. The aim is to develop a replicable model for implementing these kinds of projects in cities and regions throughout Europe, bringing together entrepreneurs, investors and policy-makers.

  Lastly, it should be noted that, along with the initiatives described above, other specific business financing initiatives, according to activity sector, are also available at Community level.