This Tuesday, the coalition government recovered the ceiling on non-financial spending and the stability objectives that a majority of the Congress of Deputies had rejected in the last plenary session in July, before the summer recess, and which are necessary to begin the process of the General State Budgets (PGE) of 2025.
At the press conference following the Council of Ministers this Tuesday, the First Vice President and Minister of Finance, María Jesús Montero, once again presented a deficit trajectory of 2.5% in 2025 and 2.1% in 2026.
The Executive has no guarantee that this time it will be able to obtain sufficient parliamentary support. In July, Junts broke the majority of Sánchez’s investiture and joined the Popular Party (PP) and Vox in rejecting these deficit paths (the imbalance between income and expenditure in relation to GDP) and highlighting the weakness of the coalition government.
If this were to happen again, Montero explained that he would also present the budgets, “with the stability objectives” above, which would mean “a budgetary adjustment of 11.5 billion euros in the next two years.” Specifically, “6.6 billion euros less in 2025 and 2026 in the Autonomous Communities” and 4.950 million in the City Councils, “which we could dedicate to health, education or social services,” the vice-president stressed.
The previous stability objectives are more rigid, with a trajectory that required local entities to spend 0.1% less of their available resources next year and 0.2% the following year, and the Autonomous Communities 0.1% in the different years (always in relation to GDP). With the new trajectories, in the case of local entities, “the objective is budgetary balance for the entire period 2025-2027, which represents a tenth more margin.” [para gastar e invertir] in 2025 and two tenths more margin in 2026,” the Treasury explained in July. In the case of the Autonomous Communities, the stability path rejected by Congress provided for a deficit target of -0.1% of GDP in 2025, 2026 and 2027.
Montero claims that the stability objectives that PP, Vox and Junts voted against have allowed the Communities not to have to make efforts to reduce the deficit in the coming years.
In 2024, the 2023 PGEs had to be extended because the government did not have the guarantee of the votes of the ERC or the Junts in Congress, especially after the call for early elections in Catalonia. But the Ministry of Finance insists that it can carry out the 2025 budgets without Congress approving the stability objectives.
In fact, sources from the team of Vice President María Jesús Montero tell elDiario.es that “this issue was already discussed at the beginning of the year with the PGE 2024, and we have already said that the Public Ministry has made it clear that it is a return to the old path.”
In March, elDiario.es had access to a report from this institution that concluded that the government had to comply with two obligations: prepare budgets and comply with EU budgetary rules, which were reactivated precisely this year after being suspended during the pandemic. Thus, in the face of parliamentary rejection, the Public Ministry indicated that “in accordance with internal legislation, a path of convergence towards the equilibrium situation will be applicable, the one contained in the stability program”, which the European Commission valued positively.
Based on this approach, the government intends to demonstrate that the pro-independence parties and the PP “will shoot themselves in the foot” if they prevent the approval in Parliament of the stability objectives that the Council of Ministers presented again this Tuesday. Because those of the previous path will remain in force, which are more demanding for the Autonomous Communities and City Councils. But the general budgets can be presented,” the Treasury specifies.
The spending ceiling approved this Tuesday is also the same as the one approved in July: this “limit” does not need the support of Congress.
The forecast for 2024 is to maintain the deficit at 3% (always in relation to GDP), which has allowed Spain to avoid the excessive deficit process foreseen by the new EU rules. This “process” would involve an intervention by the European Commission in national budgets to guarantee “the sustainability of public accounts”.
Medium-term budget plan in the fall
Economic growth will allow public debt to be reduced relative to GDP until it falls below 100% in 2027, according to the same estimate, “recovering all the fiscal space” during the pandemic, in which the government had to make a historic spending effort. public to mitigate the damage of the COVID shock.
“The deficit can be reduced without cuts,” insisted the First Vice-President. Next September, the Executive must send Brussels a medium-term budget plan (the AIReF recommendations are analyzed here), which will be marked by a deficit trajectory and a GDP growth horizon of more than 2% in the coming years and the creation of jobs, which allows to maintain spending and reduce the deficit. “We are interacting with the Commission to determine the final proposal on net primary spending, which is the most important variable of the new Community budgetary rules,” warned the Minister of Finance.
