TheEconomistMay28th 2022 Europe 31rials and energy well into double digits,
some countries’ agreed investment targets
may already be out of reach. Rewriting the
plans is possible (under strict conditions)
but considered a last resort. The commis
sion is hoping that national governments
will use their own funds to plug the gaps,
or employ unused European money alrea
dy at their disposal.
Whether the scheme is contributing to
inflation or helping to curb it is a tricky
question. Some argue that recoveryfund
investment, combined with competition
enhancing reforms and digitalisation, will
reduce price pressures over the medium
term. But at the same time the additional
European money allows recipient coun
tries to spend more on supporting the
economy, which could add to inflation.
The energy crisis is the second chal
lenge. Climate change featured heavily in
the fund’s original mandate, and at least
37% of each country’s allocation has to be
spent on “green” projects (many countries
are going higher). But the Russian assault
has changed priorities: energy security
now comes first. Many of the approved
green projects, such as home insulation or
renewable energy, will also make Europe
less dependent on foreign fossil fuels. But
others that are needed to boost energy se
curity, such as lng terminals, are difficult
to square with the fund’s guidelines.
In response to the war, the commission
has put together a new programme, called
repowereu. Countries are being invited to
add a new energysecurity chapter, for
which looser standards apply, to their
plans. The problem is how to fund it. The
commission cannot simply borrow when
it wants to, as a sovereign government can.
Instead, it has to “mobilise” money—Brus
sels jargon for either reshuffling existing
funds or using small amounts as leverage
for raising private investment. The loan
compartments of the recovery fund have
so far been requested by only seven coun
tries, leaving €225bn in the pot. Redirect
ing that money to the energysecurity
chapters offers one way out.
The third challenge is the war itself. The
eu’s treaties do not allow the bloc to spend
eu money directly on defence. But there
are ways around that. If research or the
strengthening of the internal market is in
volved, the eu can contribute to defence
linked projects. In response to the war, the
commission has proposed bolstering joint
European procurement, but with just
€500m over the next two years.
What eu treaties fully provide for is fi
nancial assistance to third countries. Inother words, for rebuilding Ukraine. The
commission is considering a new recon
struction fund for Ukraine based on Eu
rope’s own recovery fund, and has suggest
ed commonly issued bonds as one funding
option. National capitals are not all in fa
vour, but the scale of the problem may well
call for a European response. Jacob Kirke
gaard of the Peterson Institute for Interna
tional Economics, a thinktank, argues
that there is now a European scale of sever
ity of crises. “Europe will use common,
debtfunded spending at scale if a certain
crisis thresholdis reached. And Ukraine
will be sucha threshold, just as the pan
demic was.”nBoosting the recovery
EU Recovery and Resilience Facility,
grant allocations*, 2020-26, % of 2021 GDP
Selected countriesSources: European Commission; Eurostat *202 pricesGermanyFranceItalyPolandHungarySpainRomaniaSlovakiaPortugalBulgariaGreeceCroatia12963025.639.468.923.97.269.514.26.313.96.317.86.3€bn“E
xplanations?ofwhat?”With
three words, the former king of
Spain, Juan Carlos I, ensured that his first
trip home for two years would make
waves. Asked by a journalist if he would
comment on the allegations that have
dogged him for years, he suggested he
had nothing to answer for.
Juan Carlos arrived on May 19th in
Sanxenxo, on the west coast. He attended
a regatta, waved to admirers and stayed
with a friend, trailed by “more cameras
than at my wedding”, his daughter
quipped. Only after a long weekend did
he visit Madrid, and his son, the current
king, Felipe VI. Juan Carlos spent 11 hours
at his old home, but not the night—
apparently at Felipe’s request.
The former king has lived in Abu
Dhabi since 2020, under a cloud of legal
and personal scandal. He recently paid
Spain €4.4m ($4.7m) in back taxes. But
he is accused of taking a “commission”
for helping a Spanish consortium win a
highspeed rail bid in Saudi Arabia,
which he denies. Spanish prosecutors
have dropped the charges against him,
saying that the events either have passed
the statute of limitations or occurred
when he was covered by his constitu
tional immunity as king.
But he has been unable to explain a
$100m gift from the Saudi royal family,
and the role he might have played in the
rail contract. A former lover, Corinna
Larsen zu SaynWittgenstein, says he
gave her €65m in 2012, then asked for it
back. When she refused, she says, she
was harassed by the Spanish intelligence
service, for which she has sued him in
London, where she lives. Earlier this
year, a judge there threw out his claim of
immunity and let her suit proceed.Commentatorsandpoliticians sput
tered at Juan Carlos’s visit. The radical
left Podemos party reiterated its call for a
republic. The rightwing parties treated
criticisms of the former king as an attack
on the monarchy itself. The Socialists,
who head the government, tried to walk a
line between the two, saying Juan Carlos
had missed a chance to explain and ask
for forgiveness, while praising Felipe for
his transparency (he recently disclosed
his personal assets).
The king is described in the constitu
tion as a symbol of unity. Felipe tries
hard to play the part. His father, long
remembered for a heroic role in Spain’s
transition to democracy, as well as for his
common touch, is now apparently past
caring who is annoyed by his antics. He
says he wants to “normalise” his visits to
Spain, and will return in June—for an
other regatta.Spain’smonarchyThe return of the king
M ADRID
Spain’s former monarch is a headache for his sonNothing to see here