The first decision of the Council of Ministers after the investiture of Pedro Sánchez was yesterday to approve the ministerial order of Finance in which the general rules for the preparation of the budgets for 2024 are dictated. The ministries open the legislature by starting the preparation of the most important bill of the political year. The fourth vice-president and Minister of Finance, María Jesús Montero, is aware, however, of the difficulty it will entail in approving in the Senate, controlled by the PP with an absolute majority, the new deficit and public debt plan in a scenario of a return of tax rules.
The problem is not validating the spending ceiling, which will once again be historic, central government sources explain. The limit to spend is a decision that corresponds to the Council of Ministers and that does not need to go through the General Courts. The main drawback to overcome is validating the objectives of budget stability and debt for all public administrations for the period 2024-2026, which do need to go through the procedure in the Upper House.
The Senate, controlled by the PP, already in 2018 overturned the fiscal objectives of the first Sánchez government, formed after the motion of no confidence. The decision taken by the Treasury then was to extend the plan set by the government of Mariano Rajoy and not to update it in the bill that was registered in Congress. That budget would receive the ERC’s refusal weeks later and Sánchez called elections.
This time Treasury cannot extend any deficit and debt targets because the fiscal rules are suspended and therefore there is no stability plan in place. It is an unprecedented scenario. But the Spanish Government must obligatorily set a fiscal plan for the next three years to meet the requirements of the European Commission. Faced with the possibility of the PP blocking the fiscal plan, Montero’s department is already working on formulas to save the situation. One possibility, which was already considered by the minister in 2019, would be to reform the law on Budgetary Stability and Financial Sustainability, which is organic and therefore would need an absolute majority. Article 15.6 of the rule states that “Congress and the Senate pronounce themselves approving or rejecting the objectives proposed by the Government”. The problem is that such a reform would require several months and the Executive has urgency to approve the 2024 budgets.
In the budget plan sent to Brussels in October, which already received criticism from the PP, the Treasury predicted an overall fiscal balance of 3% of GDP and a debt-to-GDP ratio of 106.3% in 2024.
The Treasury announced yesterday that the next budgets will foresee a disbursement schedule of up to 25.6 billion in 2024 from European funds, between transfers and loans, and warned that the forecast is that the geopolitical instability resulting from the war in Ukraine, aggravated now also because of the conflict between Israel and Hamas, it will continue during the coming year. A complex context in which the Spanish economy will grow above the EU average, according to all national and international bodies.
An inertial economic scenario was reflected in the budget plan endorsed this week by Brussels. But the Spanish Government has announced new measures that will increase spending. For example, the extension of the VAT reduction on some foods until June, which will cost around 700 million, or the free public transport for young people, retirees and the unemployed. The extra collection will cover these grants.
Housing, with its own ministry, will be one of the priorities of the next public accounts. Specifically, they will affect “the right to housing by increasing the public park for affordable rent through a public investment policy”. Also the decarbonisation of the economy or the strengthening of employment policies. The ministerial order also envisages the promotion of “a great income pact for price stability that guarantees the recovery of the purchasing power of wages”, a shock plan in the face of long-term unemployment, improve and simplify the unemployment assistance level and consolidate improvements in social protection and self-employed benefits.
Yesterday, Pedro Sánchez took advantage of the first meeting with the ministers of his new term to hand them a personalized letter, signed by the head of the Executive, in which he urges them to act “with unity, solvency and determination, in the shared effort to contribute to social progress, coexistence, institutional stability and dialogue between different people”. The priorities of the new legislature that he mentions in the letter are to “culminate the modernization and transformation of the productive fabric, in a green and digital key”; further strengthen the welfare state to “reduce inequality with more resources allocated to education, health and dependency”; continue promoting a “just ecological transition”; to consolidate Spain as a “world leader in real and effective equality between men and women”; strengthen territorial cohesion and face the demographic challenge; “advance the agenda of reunification to guarantee harmony in the country”, and “continue to strengthen Spain’s leadership in the European and international arena”.
“We are not strangers to the current political climate – points out Sánchez in the letter -. A climate exacerbated by those who not only deny the legitimacy of origin to this Executive, but who seek to question its legitimacy of exercise. We will respond to tension with work. To the interested noise, with dialogue and outstretched hand. To disqualification and insult, with a sincere appeal to the harmony and coexistence that the vast majority of society longs for”.
The minister spokeswoman for the Government, Pilar Alegría, also made her debut in Moncloa yesterday. Regarding the criticisms of the PP, he stated that they respond to the sole objective “that Pedro Sánchez ceases to be president of the Government”. The Minister of Education, Vocational Training and Sports also expressed the “full respect” of the Government for the decision of the judge of the National Court Manuel García-Castellón, who has asked Switzerland to collaborate in the location of the secretary General of ERC, Marta Rovira. And to the former ministers of Podemos, Irene Montero and Ione Belarra, he wished them “the best”.
