The Spanish Government’s decision to waive the presentation of the State’s general budget (PGE) after the electoral advance in Catalonia will force the search for new parliamentary and accounting formulas to give way to the main economic measures scheduled for this year . There are dozens of ongoing initiatives that are now up in the air or at least pending a path to success. They range from the forgiveness of the debt of the Autonomous Liquidity Fund (FLA) to the entry of SEPI into Telefónica, through fiscal adjustments related to the extraordinary tax on energy companies or subsidies for the purchase of electric cars. The central government recognizes that it will have to find alternatives, but the situation remains dramatic. Treasury sources recall that Pedro Sánchez governed between 2018 and 2021, with a pandemic in the middle, with no other budgets than those he had inherited from Mariano Rajoy. He governed, of course, with a parliamentary scenario that was a little more manageable.
The Minister of Finance, María Jesús Montero, acknowledged yesterday that renouncing the budgets “was not part of the equation”, while the Minister of Economy, Carlos Cuerpo, launched two messages to try to dispel the main fears: the funds Europeans are not in danger and the Spanish Government remains committed to placing the public deficit at 3%. The idea now is to take advantage of the work already done to draw up the accounts for 2025 in the autumn.
Without a Budget law, the Spanish Government will have to look for new legislative vehicles for measures such as the forgiveness of nearly 60,000 million euros of regional debt, the result of the investiture agreements to relieve Catalonia’s obligations with the FLA by 15,000 million . In terms of national accounting, it also requires an extraordinary transfer to the autonomous communities, whose natural way is the budgets. The most suitable ways would have been the budget law or a reform of the regional financing which is still far from concrete.
Diego Martínez, professor at the Pablo de Olavide University and Fedea researcher, also warns that without budgets it is not possible to update payments on account to the autonomous communities, but he believes that there will be no treasury tensions because the Treasury plans to transfer the settlement of 2022 in July, which will be a record, of around 20,000 million euros.
There are at least two fiscal measures that, like the FLA debt, had to be included in the budgets and require approval through legislation. One is the review of the extraordinary tax on energy companies so that investments in decarbonisation can be exempted. The measure follows Repsol’s threat to paralyze projects in Spain and responds to a commitment by the Executive at the end of the year to include it in the budgets. The intention now is to resort to a decree law for urgent matters or to some bill to adopt it.
Also at stake is the possible approval of tax incentives for the purchase of electric cars, which must be included in a law. For some time, the manufacturers’ association Anfac has been calling for them to encourage a market that has not yet taken off. In addition, the current Moves plan ends in the middle of the year and the Spanish Government must decide whether to extend it using the recovery funds, without the need, in this case, to go through Congress.
There are other items of expenditure that, in the absence of budgets, will have to find placement. One of which has to do with the budgets of the ministries themselves. There are two new departments, Digital Transformation and Children, and they run the risk of being left without a specific endowment.
Another issue that remains up in the air is the purchase of 10% of Telefónica through SEPI for nearly 2,000 million euros. Since the Spanish Government ordered the public holding company to obtain the participation, a special allocation in the budgets for SEPI, whose debt of 3,000 million euros prevents it from facing the effort, was studied as the first option with own resources. The central government will now have to look for alternatives.
The lack of budget also opens up an unknown about defense spending. Amid growing pressure from the United States for NATO countries’ military spending to reach 2% of GDP, Defense Minister Margarita Robles announced that her department’s budget will continue to rise and reach 1 .3% this year, compared to 1.2% in 2023, which implies around 19,000 million euros. It is the star item in terms of budget spending. Sources in the military industry assure that the Executive would have other mechanisms available to increase the game, such as increasing the endowment of the special weapons programs (PEA).
The absence of budgets also forces the Spanish Government to use extraordinary mechanisms to update items of social expenditure. This is the case of possible increases in dependency, such as those that had occurred in recent years. On the other hand, the Spanish Government had already announced that it would update the salary of civil servants through an amendment introduced by the PSOE in the aid bill that is being processed in Congress.
