The Government's decision to renounce presenting the General State Budgets (PGE) for 2024 after the early elections in Catalonia has direct effects on some of the major economic measures scheduled for this year. From the forgiveness of the regional debt of the FLA to the acquisition of 10% of Telefónica through the SEPI, through aid for the purchase of electric cars or the review of the extraordinary tax on energy companies, there is a long list of measures that may be compromised and that generate concern in companies and individuals.
Sources from the Ministry of Finance downplay the seriousness of the renewal of public accounts. They trust in parliamentary agreements to carry out the measures that imply a change in regulation and assure that there are alternatives to provide an outlet for different spending items. "Not having budgets does not mean that you lack capacity," they say. They also remember that Pedro Sánchez governed from the 2018 motion of censure until 2021 with budgets extended from the Mariano Rajoy era and that this did not prevent carrying out shock measures in the middle of the pandemic. The idea is to take advantage of the work already done to prepare the accounts for 2025.
There are, however, measures for which a new parliamentary or accounting fit will now have to be sought. The main ones are the following:
The Government recognizes that the cancellation of the 15,000 million euros of Catalonia's debt with the FLA agreed in the investiture agreement and its extension to the regional debt for a total amount of about 60,000 million euros has to go through Congress. By not doing so in the budgets, it will have to rely on "parliamentary arithmetic" for it to prosper.
In terms of national accounting, it requires an extraordinary transfer to the autonomous communities whose natural route is the Budgets. Another legislative vehicle will have to be sought, and the one that is presented as most appropriate, that of the reform of regional financing, is still far from being ready. There are autonomous communities that have relief from forgiveness for this year.
One of the most important measures that the Government had designed in the Budget was the incentive for investments in decarbonization so that large energy companies could reduce the bill of the extraordinary tax applied after the invasion of Ukraine. The change also has to go through Congress.
In the aid decree approved at the end of December and which is now being processed as a bill in Congress, the mandate was established for the Government to establish “in the General State Budget Law for the year 2024 an incentive that will be applicable in the energy sector for strategic investments made since January 1, 2024.” This commitment is still valid on the part of the Government.
Government sources explain that, in the absence of a Budget bill, they could resort to other legislative mechanisms to approve the incentive. They cite, specifically, the decree-law for urgent matters or the bill. The incentives are mainly related to deductions for storage projects, new fuels and infrastructure.
Another issue that remains up in the air is the financing of the State's entry into Telefónica. On December 19, the Government confirmed its intention for the State Industrial Participations Company (SEPI) to acquire 10% of Telefónica for an approximate amount of 2,000 million euros.
Since that announcement, it was proposed that the best way to finance this acquisition would be through the General Budgets. SEPI currently has debt, mostly from banks, that exceeds 3.5 billion euros. An extension of the same was ruled out, much more so after the large Spanish banks declined to support a direct entry of the Government into Telefónica's shareholding.
The Ministry of Finance itself was looking for alternatives to identify which other Central Administration spending items the cost of purchasing Telefónica could fall on. The conclusion of the study was that it was best to return to the first idea of financing via budget. Given the current situation, it will have to resume those routes that were brought to a standstill a little less than a month ago. There are therefore alternatives that avoid going through Congress.
Amid growing pressure from the United States for defense spending in NATO countries to reach 2% of GDP, Defense Minister Margarita Robles announced that her department's budget will continue to rise and reach 1.3%. this year, compared to 1.2% in 2023, which implies reaching around 19,000 million euros. It is the star item when it comes to budget spending. Sources from the military industry assure that the Executive would have other mechanisms available to increase the military allocation, even without public accounts in force, such as increasing the allocation of special weapons programs (PEA).
The absence of Budgets also forces the Government to use extraordinary mechanisms to update social spending items. For example, possible increases in dependency, as had occurred in recent years. We must not forget either that Pedro Sánchez reconfigured the Government after the inauguration, creating new ministries, such as Digital Transformation or Children, which at this time do not have a specific budget item defined. The Government has decided to update the salary of civil servants through an amendment introduced by the PSOE in the aforementioned aid bill.
Another item that will have to be reconfigured using other mechanisms will be the distribution of European funds that was planned to be reflected in the 2024 Budgets. Last week, the Ministry of Finance activated meetings with the autonomous communities to reflect certain certain aspects in the bill. games linked to the Next Generation. This distribution channel is blocked until 2025. Treasury sources explain that the execution and deployment of funds is not at risk because the transfers of the budgets that will be extended are in themselves higher than those that would be included in those of 2024. Sources of the Ministry of Industry agree that the most ambitious investment program of those underway, the automotive Perte VEC, is not in danger either, with the money arriving from Europe.
The Secretary of State for Economy, Israel Arroyo, has assured today that the lack of Budgets will not have “any impact nor will it represent a slowdown” in the pace of execution of European funds. The extended accounts, he has assured, contain “sufficient space to carry out the planned disbursements and for the execution of the demand” of the Next Generation EU. However, he has recognized the need to analyze “if there was any small element that was included in the Budgets and that did not require the development of any of the elements of the Addendum”, so “it will now have to go in another vehicle.” .
The Government argues that a solution can also be given to the budgetary room for maneuver of the autonomous communities. With the veto in the Senate on the path of stability, the Government gained the tenths that the autonomous communities and city councils lost. Previously it had a deficit target of 2.8% and now it would be 3%. In this way, the impact on the Budgets would be positive, amounting to about 3,000 million euros.
The associations in the automotive sector are concerned because they expected in the Budgets the regulatory change that will allow direct aid for the purchase of electric cars to be received automatically. Once again, the Government insists that there is parliamentary scope to study measures. The Government's unique aid has been exhausted and now there is an expanded and territorialized Moves whose deadline expires on June 30. They are funds from the recovery plan and the Executive must decide whether to expand them, without having to go through Congress.
The prognosis is worse for tax incentives, currently consisting of a 15% deduction until the end of the year. This aid would be maintained, but it could not be improved unless the Treasury decides to do so through some law.
The recovery of the CNE through its segregation from the current Competition macro-authority, the CNMC, requires a separate budget chapter, in which the funds for the new authority hang from the Ministry of Ecological Transition. Currently, the CNMC, despite being independent, is financed with an Economy item. The rush is relative because the law creating the CNE must first be approved, although time is of the essence. The Government's intention was for it to begin operating in 2025.
The 2024 accounts must be more restrictive due to the Government's commitment to recover fiscal rules after the pandemic hit. The message is that, despite the extension of the budget, the objective of the public deficit not exceeding 3% is maintained.
