Government Creates New Financial Instrument to Ensure 100% Execution of PRR Grants
The Portuguese Government has established a new financial instrument with an initial allocation of €315 million, designed to absorb any unspent funds from the national Recovery and Resilience Plan (PRR) and redirect them towards innovative corporate investments. This strategic measure, announced by the Minister of the Economy, Manuel Castro Almeida, will be managed by the promotional bank, Banco de Fomento, and is intended to guarantee the full utilization of all PRR subventions by the 2026 deadline.
This instrument will function as a “safety valve” for the PRR, often referred to as the “bazooka.” Minister Castro Almeida explained that as the demanding 2026 deadline approaches, any investment for which the conditions for execution are not met will have its allocated funds rechanneled into this new instrument for innovation. “If any target or milestone fails, we will alter that component, add it to the innovation and competitiveness one, and place the money in this instrument,” the minister stated, ensuring that no grant funding is lost.
A significant feature of this policy is the direct benefit to the construction sector. The minister highlighted that the instrument “allows for the extension of the tight execution deadline when it involves civil construction works.” A project can secure its funding as long as the Banco de Fomento signs the contract with the beneficiary by the August 2026 cut-off date, even if the physical execution of the work extends beyond that period. This provides critical flexibility for developers and builders.
The policy also aims to rebalance the PRR’s focus, which was initially heavily directed at the public sector. “We will do some justice to the business sector,” Castro Almeida remarked, noting that while 95% of EU funds are typically for SMEs, this instrument will also support large companies that foster innovation and “pay better salaries.” Furthermore, since the investments are channeled through the Banco de Fomento, they do not have a direct impact on the national budget deficit.
Gonçalo Regalado, the executive president of Banco de Fomento, detailed the operational model of the new instrument. He described it as “faster” and “simpler” than traditional funding applications. Entrepreneurs can present projects in areas such as reindustrialization, artificial intelligence, or sustainability through a streamlined process. The financing combines a loan, a public guarantee, and a results-based grant component.
This structure is based on the successful model used for the Covid-19 support lines, where companies that met employment and tax compliance targets could convert up to 20% of their loan (capped at €800,000) into a non-repayable subvention. “We will replicate this model, guaranteeing investment capacity for entrepreneurs,” Regalado said. He estimates that the initial €315 million in grant-convertible funding could support a total application volume of around €800 to €850 million.
Eligible costs under this new instrument include tangible and intangible fixed assets, personnel costs for researchers and technicians, external services, and R&D equipment. Crucially, large companies are eligible to apply for reindustrialization projects, broadening the scope of support beyond small and medium-sized enterprises. The first calls for proposals under this new instrument are expected to be launched shortly.
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