Millions trickle down to defense: this is how the state reaches 2% of GDP

MadridDonald Trump told Pedro Sánchez this Monday that the State was "doing a fantastic job" in increasing public spending on defense. Twenty-four hours later, the President of the United States completely changed his tone, stating that he is "very disappointed" with Spain for the little money it invests in this area.

The President of the Spanish Government some time ago opened a clash with the White House after refusing to reach 5% of GDP for defense. Now, he is doing his part to reach 2% by 2025, as he has committed to NATO. He is doing this through a trickle of millions of euros approved by the Council of Ministers, and which do not require the approval of the Congress of Deputies, so unlike other issues—for example, the arms embargo on Israel–, go unnoticed. With these disbursements, Sánchez is responding to the Industrial and Technological Plan for Security and Defense announced in April and valued at 10.471 billion euros –only a portion will be implemented by 2025– and which should allow Spain to meet that 2% of GDP for defense. The last major items linked to the plan were approved, precisely, at the Council of Ministers this Tuesday.

To begin with, five loans have been approved to fulfill five military programs of the plan that should serve for "modernization in the land and air sectors." The five programs total 1.291 billion euros. The first program (788 million euros) has been awarded to the company TESS Defense and will equip the Army with new vehicles. A second program of 132 million euros has been awarded to the company UROVESA and should also serve to equip the Army with new vehicles. The third program (176 million euros) involves updating the so-called Pizarro vehicles and has been awarded to the company Santa Bárbara, a subsidiary of the American company General Dynamics; The fourth program (€17 million) has been awarded to Indra and Escribano to develop the Counter-UAS System, which, among other things, seeks to neutralize drones. The final program (€178 million) went to AERTEC Defense and Aerial Systems, which will develop "autonomous robotic aerial mobility technologies with sensors."

Likewise, another series of multi-year direct loans were granted under special conditions: a fixed, non-revisable 0% interest rate linked to 10 other programs corresponding to the plan approved in April, totaling €4.719 billion, as indicated by the Cabinet's statement.

The main company to benefit from the development of these last 10 programs is once again the defense company Indra, where the State holds 28% of the share capital. Specifically, the company chaired by Ángel Escribano will have access to €4.652 billion of the total granted.

Some of the amounts, however, are shared with other companies with which it has joined forces to win the concession. For example, the emergence of Telefónica stands out.Its president, Marc Murtra, already announced that he wanted to invest in defense.–, with whom it will share a €380 million loan. With the Escribano firm, chaired by Javier Escribano, brother of Ángel Escribano, Indra will share three of the ten loans granted (€3.152 billion). Finally, a €67 million loan has been awarded to Grupo Oesía and Epicom. Of these, the Spanish companies Escribano and Grupo Oesía are the ones that have historically maintained commercial relations with Israel.

Finally, and outside of the extraordinary spring plan, the Spanish government has also approved three direct loans earmarked exclusively for Indra. A total of €880 million is allocated to develop three programs aimed at cybersecurity and technologies related to security and localization. Taking into account the loan lines linked to the plan and these latter, the Spanish government approved the granting of €6.89 billion in a single day.

What happened at the Cabinet meeting this Tuesday, however, has been the usual pattern since the return from the summer holidays.

Deployment of the extraordinary plan

Of all the cabinet meetings held from August 26 to October 14 (a total of eight), three included items linked to the plan of more than 10 billion euros approved in the spring. Under this umbrella, a one-year contract worth 17 million euros was approved for the deployment of NATO CYBER RANGE, a technological platform that provides "cyberattack prevention capabilities" at the Joint Cyberspace Command at Retamares Base in Pozuelo de Alarcón (Madridtán). Specifically, the item was approved at the cabinet meeting on September 9, which also approved 42.3 million euros for the construction of a Computer Emergency Response Center for Retamares Base itself, as well as another 17 million euros for the construction of an Operations Center (CesOC).

A week later, at the Council of Ministers on September 16, the Treasury approved a credit transfer worth €562.3 million to the Ministry of Industry to cover the expenditure linked to the plan. It should be noted that the Spanish government estimates that the ministry headed by Jordi Hereu will mobilize a total of €4.5 billion of the €10.471 billion contemplated in the plan by 2025.

Likewise, the Treasury modified the spending limit for the Ministry of Industry and the number of annual installments for acquiring spending commitments between 2026 and 2031. María Jesús Montero's portfolio has linked this lifeline to the need to finance projects by the Sociedad Anónima de Electrónica Submarina (SAES), 51% of which, and Indra (49% of the capital).

Finally, and still within the framework of the extraordinary plan, the government has approved the direct granting of loans to develop "special modernization programs in the air sector." The grant, approved on September 23, was channeled by the Ministry of Industry through two royal decrees.

The first decree is valued at €350 million, of which €278 million must be spent this year (the remainder will be invested between 2026 and 2029), according to data from the Ministry of Industry to which ARA has had access. The beneficiary companies are Indra and the Airbus defense and space subsidiary, as stated in the Cabinet meeting that day. Both companies are tasked with developing two "critical" programs for the military associated with the Next Generation Integrated Air System.

The concession linked to the second decree has been awarded only to Airbus (to the defense and space subsidiary, but also to the helicopter subsidiary) and the total amounts to 3.68 billion euros, of which 1.032 billion euros must be executed this year, according to ARA.

Why these companies?

In the references to the cabinet meetings, the Spanish government argues that the award to these companies is of a "unique nature" and that a public call for proposals is not possible because "the beneficiary entities have been considered by the Ministry of Defense to be capable of providing the optimal alternative for developing the programs."

Other items

But outside of the extraordinary spring plan, the Spanish government has focused on approving other items that have provided financial support, especially to the Ministry of Defense. In this case, Pedro Sánchez's administration is opting for avenues such as the Contingency Fund, direct credit transfers, and framework agreements (a procurement instrument that consolidates awards), and it also doesn't require the endorsement of parliamentary groups.

Here, the list is extensive because items allocated to Defense appear in every cabinet meeting. For example, on August 26, two framework agreements of €86 million and €83 million for ammunition and a €258.4 million agreement for the Comprehensive Information Infrastructure for Defense (I3D) were approved.

Later, €64.9 million was approved for the acquisition of rocket launch systems, a €25 million contract to "boost the capabilities" of the army in the face of "new cyber threats," and €716.4 million awarded to Navantia for the design and construction of two Acció Marí vessels.