This week the Government has started a new round of contacts with the parliamentary groups to try to gather sufficient support with which to approve the path of stability and debt and begin to unblock the 2025 General State Budget project. Time is of the essence, since the European Commission has given Spain ‘extra’ time to send it the draft budget with the specific measures it will apply next year. and that they necessarily have to complete their Fiscal and Structural Plan.
The Commissioner for Economic Affairs, the Italian socialist Paolo Gentiloni, already made it clear that the Commission’s flexibility with deadlines “had limits.” He did so a few days before the Ministry of Economy, Commerce and Business submitted its adjustment plan last Tuesday, October 15 without accompanying it with that budget draft.
The lack of sufficient parliamentary support has so far prevented the Executive from advancing the process to carry out next year’s accounts, so it could be the case that it would be forced to send a draft proposal to Brussels (with concrete measures to apply next year) without having even presented the Budgets in the Congress of Deputiesas elEconomista advanced.
This can pose an added problem for the Government. The Independent Authority for Fiscal Responsibility (AIReF) already claimed that there was a political consensus on the general lines of the structural fiscal adjustment plan. Financial sources consulted by ‘La Información’ question the credibility of a medium-term structural plan that has not been previously discussed in Parliament, that has not been discussed or agreed upon with the opposition and regret that the outgoing Commission has allowed the States, in general, act in this way.
The Spanish proposal vs. that of the Commission
For now, the ‘roadmap’ designed by the Executive of Pedro Sánchez proposes diluting to seven years -from 2025 to 2031, both included- the adjustment effort necessary to redirect the debt and deficit. This consolidation would be around 42,000 million euros in the aforementioned period, the equivalent of four tenths of GDP.
Some 4.5 billion would come from tax increases that would begin to be applied next year, as well as measures to make the tax system “more effective” and which are based on the recommendations of the ‘White Paper’ prepared by the Committee of Experts in March 2022. The Government would thus comply with the tax reform that Brussels demandsFurthermore, to be able to access the fifth payment of the Next Generation European funds, worth 7,000 million euros.
Economía has proposed that the key element of the new rules, computable spending (which excludes items such as debt interest or investments from European funds, among others) be limited to an increase of 3.7% in 2025, 3.5% in 2026, 3.2% in 2027, 3% in 2028, 3% in 2029, 2.5% in 2030 and 2.4% in 2031.
First exchange of opinions with Brussels
Sources close to the Government assure that There has already been a first exchange of views between the Spanish and community authorities on the proposal that the Government has sent, although the Commission will not publish its opinions on the plans of the different countries, in principle, until next November 30. Before that date it is understood that the draft budget must also have been evaluated.
For now, there would already be a disparity in criteria if taken into account in the figures sentsince the previous recommendations from Brussels for the Fiscal and Structural Plan of our country lowered the limit on the annual increase in “net primary spending” to 2.8% on average from 2025 to 2031, compared to the 3% proposed by the Executive.
On October 30, the Tax Authority will publish its traditional report on the Projects and Fundamental Lines of the Budgets of the Public Administrations. It will be necessary to see if there is any statement on the fiscal plan given that, in the absence of a public accounts project for the State, it is the only information that the supervisory body would have available to date to be able to issue an assessment.
Plans within the framework of the new fiscal rules
The tax plans are the cornerstone of the EU’s new economic governance framework, known as ‘fiscal rules’. They establish the fiscal trajectory of the Member States, as well as the priority public investments and reforms for four years (extendable to seven in exchange for structural reforms and investments).
These policies must guarantee a sustained and gradual reduction of debt and sustainable and inclusive growth, “avoiding a procyclical fiscal policy”as the Commission emphasizes. The plans must also include broader reforms and investments, in particular to address the common priorities of the European Union (such as the green and digital transitions or the strategic and defense area).
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