In U.S. charm offensive, Spanish PM highlights recovery to lure investment

By Belén Carreño and Clara-Laeila Laudette

NEW YORK (Reuters) -Spain's recovery plan needs the support of U.S. investment, Socialist Prime Minister Pedro Sanchez said on Wednesday during a trip to the United States where he highlighted his country's improving economic prospects.

Spain's economy expanded an estimated 2.4% in the second quarter from the preceding three months as it recovers from the impact of the COVID-19 pandemic, and is on course to grow 6% this year and 7% in 2022, Sanchez said on Wednesday.

Employment grew by 4.9% in the same period, he told a Reuters Newsmaker event, expressing the hope that Spain would soon become "the fastest-growing economy in the developed world" with the support of government reforms, planned in areas such as labour, pensions and the environment.

Spain was one of the countries which suffered the most from the first wave of the pandemic last year, and its subsequent strict lockdown led to a record GDP slump of 10.8% last year.

Sanchez said Spain aims to attract $500 billion in private investment to complement a recovery programme financed by European Union aid, and he hoped modernisation projects spanning education, energy and digitalisation would draw in U.S. investors.

Spain will receive a total of 140 billion euros ($165 billion) in European recovery funds, half of it in grants. This year, Spain is due to receive 19 billion euros.

Sanchez met in New York with several major investors including Bloomberg founder Michael Bloomberg and Larry Fink, CEO of BlackRock Inc (NYSE:BLK). He will continue his tour in Los Angeles and San Francisco where he will meet with CEOs from the entertainment industry and Silicon Valley.

CLIMATE SHADOWS

Sanchez said Spain would allocate 40% of its European recovery funds to projects related to sustainability and the environment.

However, he highlighted the contradictions of some of the measures proposed in Europe to fight climate change, in particular a proposed carbon tax, a tax on energy brought in from third countries where the 'cleanliness' of production could not be certified.

Spain was one of the first countries to call for such a tax in Europe.

"It's a matter of having a level playing field - in Europe we don't feel we're playing with the same level of protection," he said, referring to competitors in Asia.

However, Sanchez warned the policy could have a "regressive" effect by hurting low income consumers and said European leaders needed to consider potential impacts.

"It's key that this transition has an inclusive and not elitist perspective," he said.

Pointing to the end of coal mining in Spain, which included a compensation fund for former coal workers, Sanchez said similar mechanisms may be needed to minimise the inequality-deepening potential of the proposed carbon tax.