2023-11-21 16:55:24
He Spanish budget plan for 2024, sent to Brussels in mid-October by the acting Government of Pedro Sánchez, is “in line” with the EU fiscal guidelines. The European Commission this Wednesday gave its approval to the budget extension, although it warns that Spain faces a situation “difficult” and “complicated”due to a hole in public accounts that will exceed, according to the latest autumn forecasts, the 3% threshold in both 2024 and 2025 and public debt will continue to be very high, at 106% of GDP during the next two years, and you will have to send a updated budget plan “as soon as possible”.
“The draft budget plans of Slovakia, Spain, Luxembourg and the Netherlands -which celebrates elections this Wednesday- were presented by the acting governments, in view of the evolution of their national political cycles. Slovakia, Spain and Luxembourg are therefore invited to submit draft updated budget plans. as soon as possible“, says the Commission within the framework of the autumn package of the European semester and the annual cycle of economic policy coordination, which this year is anticipated to be special given that at the end of the year the general clause of the Stability and Growth Pact (PEC) that will allow Brussels to get going again sanctioning procedures for countries that do not present healthy public accounts.
The opening of procedures will depend on the data at the end of 2023 but at the moment they are 9 countries of the Eurozone for which Brussels predicts budgetary deviations greater than 3% of GDP, as is the case, according to the latest autumn economic forecasts, of Spain which once again positions itself as one of the 11 member states – along with Italy, France, Germany, the Netherlands and Hungary among others – with excessive macroeconomic imbalances and which will be the subject of a new examination by Brussels.
Credible tax strategy
“The tax situation in Spain is complicated. Clearly, it will be necessary to establish a credible tax strategy in the medium term,” estimate sources from the Community Executive questioned about a Spanish budget plan prepared without changes in economic policy due to the interim situation in which the Government has been until last week and which evaluates only the measures announced until the end of October. That is, when carrying out their analysis, community technicians have not taken into account the impact of the latest Government announcements such as the extension of some energy measures that were due to expire at the end of 2023 or the reduction in VAT for food.
“The deadline for the fiscal measures included was the end of October. We would need to see what the specified measures are and have much more clarity. Currently, (the budget) is in line with the recommendation, but the key message here is that the underlying fiscal situation is challenging,” warn sources from the Community Executive who nevertheless assure that the plan is in line with the fiscal recommendations “in all the criteria”.
Energy support measures
Broadly, the Brussels assessment concludes that several draft budget plans include plans to implement prudent fiscal policies, withdraw energy support measures in 2023 and 2024 and use the savings from these measures to reduce the deficit. However, “some Member States do not sufficiently limit the growth of nationally financed net primary spending, and some do not plan to withdraw their energy support measures quickly enough – one of the measures requested for months by Brussels to which the Eurogroup has committed – nor use the savings from these measures to reduce the deficit” although “all Member States plan to preserve nationally financed investments.”
In addition to Spain’s plan, the plan for Cyprus, Estonia, Greece, Ireland, Slovenia and Lithuania. On the other hand, those of Austria, Germany, Italy, Luxembourg, Latvia, Malta, Netherlands, Portugal and Slovakia do not fully comply with the recommendations and there are four – Belgium, Finland, France and Croatia – that run the risk of not responding to the Ecofin recommendations and will therefore have to adopt additional measures. Despite the Eurozone’s commitment to progressively eliminate energy support measures as soon as possible six countries – France, Croatia, Luxembourg, Malta, Germany and Portugal – will still have “substantial measures” in force in 2024. Brussels particularly urges Germany, Malta and Portugal to remove them as soon as possible.
Brussels will present the opinions to the Eurozone economy and finance ministers during the Eurogroup meeting in December, with a view to an in-depth discussion in January and the validation of the budget plans by European leaders at the European Council in mid-March.
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