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Illegal Hotel Grants To Be Paid By Spanish Government

Friday June 24, 2011

Illegal Hotel Grants To Be Paid By Spanish Government

The Spanish Government has accepted that it will repay the cost of grants awarded by the European Commission to eight hotels in Lanzarote that were subsequently declared illegal. Whilst a decision about the fate of these establishments has yet to be made, the fact that several of them were awarded funds by a programme within the European Commission has created some embarrassment at the European Parliament.

The agreement of the Spanish Government to accept financial responsibility should conclude what has been perceived as a 'misuse of funds', with several establishments claiming grants under the Competitiveness Programme destined for deprived areas within the European Union.

However, the fact that these hotels have failed to win basic planning approval and were declared illegal by the Superior Tribunal of the Canarian Justice (TSJC) system in 2009 means that none of them is eligible for this type of grant from the EU.

The monetary assistance was meant to help in the creation of jobs in particular areas of the Euro zone, where traditional forms of employment have dried up in recent years. As a result, a total of 23,371,000 Euros which was to be awarded to a number of Lanzarote establishments, was instead suspended by the Commission.

Of the thirteen hotels which applied for the grants between 1998 and 2002, three were considered legal and above board. These were the Hotel Playa Verde, the Timanfaya Palace and the Hotel Lanzarote Princess.

A further seven hotels made their applications but were then declared illegal by the judgment of the TSJC. These included the Rubicon Palace hotel, which received 6.8 million Euros to create 30 jobs, the Iberostar Papagayo which was awarded 1.5 million Euros to fund 75 posts, the Princesa Yaiza, with 4 million Euros granted for the creation of 157 jobs and the Hotel Melia Volcan received 3.1 million for 99 new positions of employment.

Also in receipt of European funds were the Natura Palace Hotel, which was granted 3 million euros for creating 122 new jobs, the Hesperia Lanzarote, with 2.8 million for an additional 80 posts and the Iberostar Costa Calero, which received 1.2 million Euros to help create 60 positions.

In effect, the 23 million Euros has helped in the creation of 623 jobs on Lanzarote, at the equivalent cost of 36,000 Euros for each new post.

The grants are dispersed through each individual government within the EU, so in effect the Spanish Government has paid out these funds to the hotel establishments on the understanding that the European Commission will reimburse the government.

However, now that the European Commission has ruled that the hotels should not receive any funding from its coffers, the Spanish Government will have to bear the brunt of these costs.

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