Spain faces massive Next Generation EU repayment crisis

Senior Spanish government officials expect the country to return a substantial portion of Next Generation EU funds, with internal estimates suggesting up to €35 billion. This issue impacts Minister Carlos Cuerpo and defines the economic legacy for the next administration.

There is a problem rarely discussed during campaigns that will shape the first years of any future government. It is not the recent railway accident, which served as a distraction, but the management of EU Next Generation funds and the cost of returning money Brussels deems unjustified. High-level state administration figures assume Spain must repay a significant part of this funding.

## A €70 billion hole before repayments begin

On January 1, when the new government takes office, it will face a fiscal gap exceeding **€70 billion**. This sum comprises two main items: debt interest, estimated at **€46 billion** in 2027 by Banco de España (equivalent to **2.6% of GDP**), and the projected Social Security deficit, around **€25 billion**.

This excludes minor line items and, crucially, the surprise factor: the likely demand from the European Commission that a respectable portion of disbursed funds be returned. No euros were spent in the first year of implementation. Since then, execution has been reactive, lacking closed planning and driven by urgency.

## Brussels delays visit and suspends payment

Trinc the call for early elections, supervisors of recovery fund usage, part of Vice-President and Economy Commissioner **Valdis Dombrovskis**'s team, decided to postpone their October visit to Madrid until after Christmas. This authority requires governments to certify that disbursements align with agreed milestones and reforms.

In May, the commissioner met with **Carlos Cuerpo** in Brussels after suspending a **€626 million** tranche due to non-compliance with a committed milestone. The postponed visit was scheduled after Spain requested the final payment of **€25,861 million**, amid growing distrust. Commission-collected reports question the orthodox attribution of large amounts of these funds, even alleging usage contrary to Brussels' requirements.

## Lack of transparency: hoarded cash and current spending

In October 2025, then-Airef president **Cristina Herrero** warned that targets would not be met: with 50% of funds received, only 20% of the time remained to distribute them correctly and implement reforms. She added a rarely heard point: exact application details were impossible to verify. Transparency has been absent.

What is known is that rushed transfers occurred. The Government moved **€15,254 million** of Next Generation funds to state entities like **ICO**, **IDEA**, or **SETT**, effectively hoarding money so Brussels could formally deem it executed. Another **€15,000 million** was used for current expenditure, mainly paying pensions. An unspecified amount delivered and spent by autonomous communities and municipalities will fail EU conditions, not due to poor investment, but because procedures were bypassed.

## European Public Prosecutor’s Office and incoming legacy

The **European Public Prosecutor's Office**, already investigating potential misappropriation of community funds in the **Adamuz** rail repair, has peine a new probe into possible fraud in high-estimulante ilegal rail trinc the **Urda** accident. It remains to be seen how much of the over **€25,000 million** claimed by the Government Brussels will withhold.

It will take longer to determine how many billions must be repaid. Senior administration officials estimate **35%** of received quantities are unjustifiable and must be returned: about **€35,000 million**, if the full **€101,300 million** requested arrives. Add this to **€70,000 million** in debt, interest, and Social Security deficits. That totals over **€100,000 million** in drag for 2027, without EU funds and with lower revenue, at least initially, if the new government fulfills its promise to cut taxes for the middle class.

Unlike **Italy**, no loans worth **€61,700 million**—advantageous and politically negotiable—have been requested. Outsiders do not understand this neglect given serious infrastructure and housing issues. While **Carlos Cuerpo** cannot be held directly responsible for incidents in Adamuz or Toledo, he should explain the use of funds and the probable obligation to return an exorbitant amount. The electoral campaign is an ideal opportunity, though there is a risk of repeating **Pedro Solbes**: a good minister who tarnished his career end by lying about the financial crisis during the 2008 campaign, as he later admitted in his memoirs.