The European Commission has announced an investigation into potential corruption within the leadership of the Spanish Socialist Workers' Party (PSOE), particularly concerning financial misconduct related to European taxpayer money.

The inquiry arose from revelations indicating that at least two former secretaries of organization from the PSOE, José Luis Ábalos and Santos Cerdán, may have improperly profited from multimillion-euro contracts that received funding from the European Union.

For instance, the renovation works for the high-speed rail network (AVE) in Murcia, awarded to a consortium led by Acciona, amounted to approximately €300 million and were partly financed by the European Regional Development Fund (ERDF).

Another relevant project includes a contract won by Acciona in San Feliu de Llobregat, valued at €51 million, which was also financed in part by the Next Generation EU funds, designed to assist member states recovering from the COVID-19 pandemic.

Sources from the European Commission have confirmed the seriousness of the situation, highlighting that the Commission maintains a zero-tolerance policy towards corruption and expects member states to adhere to this standard.

Upon detection of possible irregularities, the Commission is prepared to undertake appropriate actions.

Simultaneously, the European Public Prosecutor's Office is also involved, with indications that the Spanish government may have to withdraw the suspicious projects from EU funding to avoid allegations of fraud.

This process, known as de-certification, emphasizes a precautionary approach; for example, Minister María Jesús Montero previously withdrew €17.7 million allocated for medical supplies from European assistance due to concerns over compliance.

The preventive renunciation of these funds allows the government to propose alternative projects without losing out on financial aid.

The unfolding scandal coincides with existing challenges regarding the utilization of EU funds, particularly as Spain grapples with lower-than-expected absorption rates.

On Wednesday, the Bank of Spain released a report citing significant uncertainty surrounding the magnitude and composition of the Recovery and Resilience Mechanism funds and their potential economic impact.

According to Eurostat data, Spain ranks 13th in the execution of grants within the Recovery and Resilience framework, falling below the European average despite being one of the most impacted nations in terms of unemployment and socioeconomic recovery.

Spain is projected to utilize only 40% of the €80 billion earmarked for recovery until 2024, with the absorption rate dropping to just 20% when including loans, even though the halfway mark of the recovery plan has been passed.

The average absorption rate for grants across the EU stands at 45%, with Spain lagging behind several countries, including Denmark (88%), France (87%), Italy (52%), and Germany (50%).

Experts underscore the need for accelerated absorption of funds, citing the urgency of meeting the targets set for the Recovery Plan by August 2026.

However, compliance with conditions remains problematic.

The European Commission has indicated no expected date for the final approval of the fifth payment of EU funds requested by the Spanish government in December.

Several commitments, such as raising the diesel tax, have not met sufficient progress, and the Ministry of Economy has made two changes to the terms of this payment in three months without public explanation.

Currently, Spain has only fulfilled 30% of the milestones and objectives set forth in its recovery plan, necessitating enhanced efforts to guarantee the completion of all measures by the outlined deadline.

The implementation is further complicated by bottlenecks related to absorptive capacity, particularly with an anticipated surge in investments towards the end of the plan's execution.

In a wider context, the ongoing issues surrounding the management of European funds are accompanied by increasing pressure from NATO regarding military spending, leaving the Spanish government in a precarious position without a definitive budget, all while addressing rising tensions in relationships with coalition partners.