The roadmap to reduce the deficit and debt until 2031 that Spain sent to Brussels in mid-October is based on a series of reforms and investments to extend the adjustment period to seven years, instead of four planned. The government’s budget plan includes a list of measures which, divided into 20 blocks, will stimulate the economy by 3.3% until 2031. A list which includes improving unemployment assistance and access to financing for small and medium-sized businesses.
Structured in reforms and investments at the budgetary level, physical capital and productivity, human capital, ecological transition and digital transformation, the measures would help reduce the structural deficit by 2.4 points compared to the scenario without reforms, according to the document. Such reforms allow adjustment to 0.4 point of GDP in the annual budgetary adjustment to be made, compared to the 0.43 provided by the Independent Fiscal Responsibility Authority (Airef).
One of the most relevant axes is human capital focused on increasing labor market productivity, with measures that aim not only to “maximize the migratory flow”, but also to reduce employment volatility or to improve the qualifications of workers. “The progressive impact of measures relating to human capital planned in this Plan is 1.0 point of GDP”, underlines the document.
It refers to the labor market reform initiated in 2021 but also proposes the entry into force in 2025 of the reform of the unemployment compensation system, which aims to reduce structural unemployment. In addition, the plan is based on migration factor to contribute to growth economic development through qualification and improvement of professional skills.
In the physical capital segment, Moncloa’s plan includes measures to increase capital stock and productivity through facilities for commercial activity and availability of housing. It therefore proposes to improve access to financing for SMEs through of the public credit agency, the ICO. The idea is to strengthen direct financing, especially in the most difficult sectors in this regard, and a framework will be created to accelerate investment projects in Spain.
When it comes to housing, the ICO will play another key role as a developer of affordable housing, something already included in the pandemic recovery plan. It also refers to measures such as the transfer of public land and the creation of public-private financial instruments to boost the construction sector and the availability of affordable housing.
40% of the resources available in Madrid’s budget plan are dedicated to the green transition. As part of the Integrated Energy and Climate Plan (PNIEC) for 2030, the Government has established new planning for electricity distribution networks. Other formulas focused on increasing renewable capacities, in improve self-consumption and storage capacity They will contribute to an increase of one point of GDP during the adjustment period.
In the budgetary area, the plan includes measures which aim to contribute to budgetary sustainability and which are supplemented by the expenditure rule. Generally speaking, the document indicates that “Measures will be approved to make the tax system more efficient” based on the recommendations of the committee of experts. “It is expected that between 2025 and 2031, all of these measures will increase the income/GDP ratio by 0.3 points,” he adds.
It mentions elements such as the transposition of the minimum rate directive of 15% for multinationals or the improvement of collaboration agreements between the Departments of Autonomous Communities, Mutuals and Social Security to improve the management of temporary incapacity .
On the digital front, the plan envisages taking advantage of artificial intelligence through new collaboration instruments public-private for co-creation of a founding model in Spanish or the strengthening of the Spanish intensive computing network.
