The PP will reject in the Senate, where it has an absolute majority, the deficit objectives for this year and the next two that the Government managed to approve in the Congress of Deputies with the support of Junts, among other partners. The economic spokesman of Genoa, Juan Bravo, confirmed the decision of his party this morning, a refusal, he clarified, conditional on approving some tax reductions. The Treasury refuses to respond to the popular request and uses a legal report that would force the autonomous communities to cut their budgets by one tenth by 2024.
Bravo has stated that the PP would change its position if the Government decided to deflate the personal income tax rate, reduce VAT on electricity, gas, meat, fish and canned goods, eliminate the tax on energy production and “not impose tax increases on the autonomous communities”, as well as the approval of a social policy fund for them.
The PP has stressed that the Government has not negotiated with them at any time the approval of the stability path. Bravo and the spokesperson of the PP in the Senate, Alicia García, have criticized the Executive for asking “sacrifices from the city councils and autonomous communities” while “Sánchez continues to settle in waste, tax increases, the path of debt and loss of purchasing power, condemning future generations.”
The rejection of the path of stability by the PP opens an unprecedented scenario in the processing of the next budgets. The Senate’s refusal will force the Government to re-approve the deficit objectives, which could be the same, without changes. Specifically, the path that the PP will reject offers the autonomous communities an improvement of one tenth of their budgetary commitment. Thus, the deficit of the autonomies could be placed at 0.1%, compared to the budgetary stability foreseen in the Stability Plan prepared in April. In 2025 and 2026, regional governments must comply with budget balance, while public accounts will have to comply with a deficit of 2.7% in 2025 and 2.5% in 2026.
First consequence of the PP’s no: the processing of the general state budgets (PGE) for 2024 will be delayed several weeks. The Stability law provides that, if the deficit targets are rejected in the Cortes Generales, the Government will submit a new agreement on the deficit limit after one month.
The decision has its legal importance because this year the fiscal rules come into force and Spain cannot be without a path of current stability.
Once the Government approved second deficit targets in Congress, they would return to the Senate again. If the PP rejects them for the second time, the path of stability will be the one that was in force. It must be remembered that the objectives of the following three years are set in the budget paths. But at this time there is no previous path approved for the suspension of fiscal rules, which have been in place for four years.
In this situation, the Government uses the report of the State Attorney’s Office which indicates that “the stability objectives will be those that the Government would have included in the Stability Program” and not in the Budget Plan. Why the Stability Program and not the Budget Plan? Because it is in the Stability Program that medium-term budget objectives (MTO) are included, which are evaluated by the European Commission to determine whether the Member State complies with European regulations on stability of income and expenditure.
The problem, and the current first vice president, María Jesús Montero, already made it clear to the regional Treasury councilors in the Fiscal and Financial Policy Council in December, is that the path of the Stability Program is harder for the autonomies than that of the Budget Plan. “We will have to be more demanding,” said Montero. “The PP would be throwing stones at its own roof,” she added.
The consequence of the Senate rejecting on two occasions the stability path proposed by the Government would imply that the objectives of autonomous communities and city councils would be considered illegal, the Treasury defended.