The main objective of the general state budgets for 2023 is not so much to prepare Spain for the crisis as to win the elections. This is what is usually done with the last accounts of a legislature, which traditionally become a letter to the Magi. In this case, the inks have been loaded because it is necessary to buy the support of all the parties of the so-called investiture bloc. Naturally, no one is going to vote for an adjustment, because it would be tremendously unpopular. The result has been a very expansive spending budget, which brings the public deficit to 3.9% of GDP, provided that the growth that Nadia Calviño has predicted is met, which seems more than doubtful.
In other words, the administrations will spend next year at least 60,000 million euros more than they plan to collect. And this, despite the much vaunted rise in taxes on the rich, large companies and European aid. Without forgetting the rise in cold tax pressure that has meant adapting taxes to high inflation rates.
As an example, a button. The Spanish public debt is already close to one and a half billion euros, which will raise interest payments in 2023 to 31,000 million, despite the fact that interest rates are low. But to the extent that debt has to be rolled over at higher rates, it will stifle growth. For next year, the Treasury plans to carry out gross debt issues for 256,930 million, which logically the ECB will not buy at a zero rate, as it has been until now.
This is what the welfare state is putting at risk, and not the fact that the rich pay a little more or a little less. This is exactly what the financial world reproaches Nadia Calviño and her Treasury colleague.
As a former European commissioner commented privately, the government that is elected is going to have a very, very bad time over the next two years. Probably, he adds, the European Commission will be flexible in the first year of its mandate, but afterwards it will demand that all the commitments that Pedro Sánchez has assumed on behalf of the Kingdom of Spain be strictly complied with. In the event that he wins a center-right government, the adjustment that Europe is going to demand will be accompanied by large strikes and protests, as is already happening throughout Europe. In Spain, what the unions are not doing now they will do later.
Sánchez’s economic team counters that next year will end with a debt equivalent to 112.4% of GDP, almost three points less than expected for this year. What they are silent about is that this reduction is due to the effect of inflation.
Given that the GDP is calculated with the market price of the goods and services we produce, to the extent that these grow by 5.5%, the nominal GDP is higher in the same proportion. It is not that we produce more and better, but that what we produce is more expensive. On the contrary, to the extent that the debt is not affected by inflation, the debt to GDP ratio logically falls. It is therefore an optical effect.
This is what bad governments do, as Argentina or Venezuela have always done, to fight against the over-indebtedness of the country. However, governments that manage well increase wealth by producing more and better goods and services.
