Brussels expects Spain to send new budgets “as soon as possible”, after the stoppage caused by the electoral period and negotiations for the formation of a government. However, at the moment, he considers that the extension for 2024 “is in line” with his recommendations, although he warns that the fiscal situation is “very difficult”.
Four months after the elections were held and with a newly formed Executive, Brussels expects to receive new general budgets from the State in accordance with its recommendations. According to the European Commission’s analysis of the budget drafts sent so far, Spain will comply with the recommendation to limit the spending ceiling by 2.6%, as it requested in the spring, and achieve an adjustment of 0.7% of GDP. Specifically, he considers that Spain will comply, since the growth of primary expenditure (which excludes, among other issues, interest or unemployment benefits) will be 2.1%. For all this, the plan collects “in general terms” the community suggestions.
In any case, community sources warn that the “main message” is that Spain will continue with a “very difficult” fiscal situation, and that is why they are asking for “a credible medium-term fiscal strategy.” In last week’s economic forecasts, the European Commission already highlighted that, with the data currently available, Spain’s deficit in 2024 will be 3.2% and 3.4% in 2025 However, according to the central government’s calculations, the deficit will reach 3% in 2024.
The same sources also stress their concern about a “very high” debt, which will be 107.5% in 2023 and 106.5% in 2024, well above the threshold of 60% of GDP. “The risks to fiscal sustainability are high in the medium and long term, especially due to the high level of public debt and the unfavorable initial budgetary position, as well as the effects of the aging population on pension spending and health”, says the report of the European Executive. Despite everything, he values ??the decline in recent years pushed by remarkable growth, above the main countries of the euro zone.
A deficit of more than 3% and a debt well above 60% can lead Spain to open a file for excessive deficit and for its very high debt in the spring. The tax rules have been disabled since the pandemic, but from 2024 they will be back in force, pending the approval of a review that is still being negotiated.
Faced with the situation in the spring, the European Commission will prepare in-depth reports on Spain and about ten other countries that will close 2023 with excessive imbalances. Based on these documents, Brussels will decide whether the imbalances are being corrected or aggravated and what measures they must take.
In its analysis, Brussels points out once again that Spain has the highest unemployment rate in the EU, 12.9%, but values ??that in the last decade the percentage has decreased. As a result, it is no longer in a “critical situation”, but “weak, but improving”.
The Commission has taken into account in the report the extension of the budgets, in which it recalls that the option of maintaining the extraordinary energy tax or transport subsidies was included. He has taken into account that practically all measures to mitigate the impact of the energy crisis will expire on December 31, in line with what has been requested from the Executive and the Eurogroup. But they will remain waiting to analyze the impact that measures such as the extension of the VAT reduction on food can have on the budgets until June 2024, as announced by the Prime Minister, Pedro Sánchez, during the investiture speech
The Community Executive recommended that all countries eliminate the emergency measures adopted to deal with the consequences of the war in Ukraine at the beginning of 2024, and that they use the savings achieved to reduce the deficit. A movement in which the Government has so far relied.
