The new deficit and public debt limits will force the government to submit an adjustment plan to the EU in September, limiting its scope for expanding the spending ceiling, requiring more revenue and threatening to delay the budget.
Rejecting the president’s preferred resignation, he spent five days mulling it over, a milestone that would mark the future of the legislature and the succession of Pedro Sánchez as head of government.Public Budgets to 2025. Given the coalition administration’s parliamentary minority, its approval would require investment partners to be satisfied with the budget plan, however, the Treasury lost room for maneuver once the new rules came into force this week. . Renewed deficit and debt limits have already promised the government increased fiscal pressure through 2025, while limiting its ability to expand the spending ceiling and present an adjustment plan in September that threatens to delay the budget proposal.
The current government started the assembly by announcing the promotion of an untimely budget plan for 2024, which will increase the limit of non-financial expenditure to 199.12 billion euros, excluding European funds, an increase of 9.3% of national resources. , up to 189,215 million. An early call for Catalan elections for next May 12 has led the administration to commit itself to a budget plan for 2025.
The new European governance framework has been developed under budgetary orthodoxy and competitive pressure from countries prioritizing economic growth and protecting strategic investments. As a result, the new fiscal rules include the traditional limits of the economic deficit, 3% of GDP, and the debt at 60%, included in the social agreements, but allow countries to have customized integration paths. Those above the permissible limits must present a multi-year adjustment plan by September 20 of this year, in four years, if it includes structural reforms that guarantee a downward path of debt within 10 years Conclusion. Countries will have a reference path set by the European Commission regarding their spending limits. From there, Germany was able to add general adjustment safeguards. 60% and lies between the said limit.
For Spain (today with a 3.6% deficit and 107.7% debt), the Independent Commission for Fiscal Responsibility (Airef) calculates that the plan presented in September should guarantee an adjustment in annual GDP of 0.63 percentage points per year from 2025. 2028 (a total of 2.52 points) or, as expected, 0.43 points (3.01 cumulative points) annually between 2025 and 2031 over the seven years used as a marginal advantage to carry it out. The Bank of Spain estimates that the seven-year adjustment will be half a point in annual GDP. As a result, the calculations indicate that the government should propose measures to reduce expenditure and increase income by 6,000 to 9,000 million annually.
So, while under normal conditions, the finance ministry should start the budget machinery in July by promoting next year’s expenditure ceiling and fiscal path, the administration’s plans risk turning into wet paper ahead of the multi-year path to be agreed. The EU may delay the final design of the budget plan until the final adjustment plan is finalized in September.
Pending tax reform
The new social financing rules came into force last Tuesday after being published in the EU’s Official Journal, in time to save member states from having to submit a traditional stability programme. However, Spain chose to voluntarily send a document updating its financial and economic forecasts to fifteen pages, up from 125 in the previous version. Nevertheless, the government took advantage of a document promising to increase public revenue from Brussels’ GDP from 42.6% in 2024 to 42.9% in 2025, based mainly on an increase in direct taxes and social contributions. From there, it remains to be seen whether the Treasury will be forced to take new tax measures within the framework of the tax reform agreed with the EU in return for a fifth financial disbursement. The next generation.
Raising GDP growth to 1.9% in 2025, the government calculates that public spending will fall from 45.6 to 45.4%, allowing it to intensify its commitment to reduce the deficit to 2.5% by 2025.
Abolish the Senate’s veto power to facilitate express processing
As new European financial rules come into force, there is the additional difficulty of implementing common state budgets in 2025, leaving less room for spending to satisfy investment partners and restricting the calendar that remains after program changes. In September, the government began maneuvering to facilitate express processing.
Maria Jesus Montero, the first vice-president of the government and Minister of Finance, seeks to avoid the experience of processing the 2024 accounts – she resigned – after the PP took advantage of its absolute majority in the Senate. The executive’s route solicitor, which forced him to process twice by approving the use of the last route sent to Brussels.
Therefore, the groups that form the coalition government, PSOE and Sumer, have filed an amendment to the balancing act to strip the Senate of its traditional veto right over budget stability objectives introduced by PP Finance Minister Cristobal Montoro in 2012. Under the new wording that the government wants to implement before the implementation of the next fiscal path to support the 2025 accounts, it establishes that if the Senate refuses, the full session of Congress can approve it in a simple way. Majority. “There is no logic, legal or economic, that Congress cannot override a hypothetical veto on stability purposes, such as overriding the veto on general state budgets,” Treasury sources argued.
