Spain will rape again public deficit target in 2024, which could lead to a GOOD twice at the hands of Brussels. This is reflected in the data managed by the European Commission and which were published this Friday by the Bank of Spain in the report The 2024 European Semester and the Recovery and Resilience Mechanism. The document indicates that the Spanish State will once again have a gap in its accounts of more than 3% and that it will also not respect the public debt criterion, in violation of the Regulation (EC) No. 1467/1997 of the European Union.
The European Commission has forgiven Spain procedure excessive deficit – first step for a sanction file – despite having closed the 2023 financial year with 3.6%, six tenths above the threshold of 3% of GDP.
In a context where Brussels is assessing the deficit of several European countries, the European Commission has justified its decision not to open a case against Spain on the basis of economic forecasts of the Spanish government itself and the Commission.
Spain will fail to meet its deficit target
However, the new report from the Bank of Spain shows that the Commission itself now predicts that Spain will fail to meet its public deficit target again in 2024, which would put it facing a double fine: that of 2023 and that of this year.
In fact, his European Fiscal Council last October, he questioned Brussels’ decision. “This element of judgment adds a new element of discretion which does not appear in the legal provisions “relevant”, says the annual report of the EU’s independent tax body, presented in Brussels, regarding the cancellation of the sanction by Spain.
Niels ThygesenPresident of the European Fiscal Council, criticized the decision, saying that excessive deficit procedures should be based on confirmed data and not on future projections. According to Thygesen, the 3.6% deficit recorded in Spain is solid data and Brussels’ decision not to sanction the country “not suitable “strictly in accordance with the regulations in force.”
And the projections of the different institutions indicated that the Spanish deficit would be reduced to the threshold of 3% in 2024, which is why they considered the current non-compliance as “temporary”. “The EC has decided not to open PDE to Spain, considering the current excessive deficit as temporary and forecasting that its level will be below the value reference in 2024 and 2025″, indicates this Friday’s report. However, current forecasts suggest that in the long term, this will not be the case.
Same with the public debt
Spain will also fail to achieve its public debt targets, according to the same report from the Bank of Spain this Friday. “As for the debt criterion, the gross debt rate of the AAPP over the period GDP at the end of 2023, it exceeded the reference value of 60% in thirteen countries: GermanyAustria, Belgium, Cyprus, Croatia, Slovenia, SpainFinland, France, GreeceHungary, Italy And Portugal“, he explains.
“However, the EC considered that compliance with the debt criterion could not be fully assessed at that time, in line with the criteria of the new governance framework, without the existence of a spending trajectory approved by the Council,” he said.
However, Spain is far from this 60% and forecasts even suggest that the debt ratio could increase slightly at the end of this year. The socialist executive obtained a public debt balance sheet of 1.626 billion euros in the second quarter of 2024, according to data published by the Bank of Spain.
Thus, in the second quarter of 2024 – latest data available – the Spanish public debt reached a historic record of 1,626 billion euros, with an increase of 11,355 million compared to the previous quarter, which represents an increase of 0.7 %.
Of course, despite this increase in absolute terms, the weight of debt in GDP (Gross Domestic Product) decreased by one point, from 106.3% to 105.3%, due to the growth in economic activity. But this percentage is quite far from the 60% requested by the European Commission.
