The Independent Fiscal Responsibility Authority (Airef) will be attentive to the application in Spain of the new European framework that is being prepared in Brussels. The organization, chaired by Cristina Herrero, published yesterday the activity plan for the coming months, in which the priority is clear: 2024 is a key year for fiscal policy due to the return of the new rules and, therefore , the work will consist of a “special attention” on the supervision of the public accounts of all administrations to guarantee their sustainability in the medium and long term.
The Fiscal Authority detailed in the roadmap that this exercise “will carry out the necessary fiscal supervision tasks” based on a specific opinion on the reform of the Community framework and its involvement in the Spanish area. Pending to know the final translation of the rules, which aim to be more flexible, but maintain the limit of 3% of deficit on GDP and 60% of debt, the independent body advanced that, when they are known precisely, it will provide a specific analysis for the transposition of the future directive.
The fiscal supervisor has been insisting for months that the public debt will continue to grow in a worrying way if the necessary measures are not taken to curb it. In the last observatory, in September, Airef positively assessed the reduction of the debt ratio over GDP to 111.2% in the second quarter of 2023, which meant a reduction of four tenths compared to at the end of 2022. But he also warned that the figure represented an increase of 13 points compared to the pre-pandemic level. In monetary terms, the public debt continues to grow, reaching 1.582 trillion in January, the historical maximum, according to the latest data from the Bank of Spain.
On the other hand, the President of the Spanish Government, Pedro Sánchez, advanced yesterday at the control session in Congress a lag in public administrations of 3.7% of GDP at the end of 2023, which would mean two tenths less compared to the scenario that the Executive transmitted to the European Commission. Treasury sources explain that this reduction of more than 3,000 million in the deficit has been possible thanks to the improvement of the economy and the increase in revenue, which continued to grow last year. The public deficit was 4.8% at the end of 2022, and the objective that the Spanish Government has set is for it to fall to 3% by the end of this financial year, which will not be easy. However, this best result in 2023 can help achieve this goal.
Two bodies such as the Bank of Spain and Airef question whether it will be possible to close in 2024 with 3%. The Bank of Spain warned last week that, in the absence of new adjustment measures, the deficit of the administrations could reach 3.5% by the end of the year. For its part, Airef warned in December that in order to reach the 3% target, it would have been necessary not to extend some of the tax credits that have been in force since the outbreak of the war in Ukraine. But the Spanish Government did extend some of the aid, such as the VAT reduction on food, until June, and moderated reductions in energy taxes.
Regarding the absence of general State budgets in 2024, the Fiscal Authority plans to draw up a specific report on the consequences of the budget extension on public finances.
Airef also insisted to the Spanish Government the need to present a five-year fiscal consolidation plan, extendable to seven, for all public administrations. Today it does not exist. In this sense, Cristina Herrero herself called on the Ministry of Finance to draw up “a realistic and credible fiscal strategy”.
The Fiscal Authority pointed out yesterday that “it will strengthen the medium and long-term analyzes and the implications for the sustainability of public finances”. Throughout this year, work will begin on the second long-term sustainability opinion of public administrations and the report on the pension spending rule, which will be published in 2025.
