The Fiscal Authority today reproached the Government for not having designed a medium and long-term stability strategy in a scenario of return to fiscal rules that will require spending containment. Hours after knowing the deficit path approved by the Council of Ministers, the supervisory body chaired by Cristina Herrero denounced that the Executive document “does not comply with what is established by the Organic Law of Budgetary Stability and Financial Sustainability (LOEPSF)” refer only to the fiscal plans designed by the Ministry of Finance in April, when it presented the Stability Program to Brussels, and in October, when it did the same with the Budget Plan.
The Independent Authority for Fiscal Responsibility (AIReF) argues in its report that “the concurrence of exceptional circumstances that allow the suspension of fiscal rules requires the approval of a Rebalancing Plan to correct the structural deficit incurred during the suspension” of them. . And also to increase the downward rate of debt in relation to GDP, says the Authority.
That the Government has not designed a future stability strategy is a recurring complaint from AIReF. He already launched it before the summer. On this occasion, the urgency is imperative, since in 2024, whether there is an agreement in Brussels or not, Spain must adjust its deficit to 3%. For 2025, the Treasury forecast is that the gap will be 2.7% and in 2026, 2.5%.
The Government documents, explains the Tax Authority, “also do not have a forecast of income and expenses for the central administration, as required by law.” Remember
Furthermore, the Rebalancing Plan (that is the name of the document approved yesterday in the Council of Ministers) “does not explicitly include the macroeconomic picture that underlies the fiscal path,” adds AIReF. At this point there are differences between the Government and the regulator. The institution forecasts in its October report a real GDP growth of 1.7% in 2024, compared to the 2% estimated by the Government in the Budget Plan for that same year. For 2025 and 2026 the discrepancies are smaller, since AIReF estimates an increase in real GDP of 1.8% and 1.6%, respectively, in those years, similar to 1.8% and 1.7 %.
AIReF has already concluded that if the Government wants to achieve the 3% deficit objective it should not extend measures to combat inflation. However, the fourth vice president and Minister of Finance, María Jesús Montero, announced yesterday that she has sufficient fiscal margin to maintain some thanks to an increase in collection that she set at 9% for 2024. She ruled out new help.
Herrero's team also remembers that the Government designed a Budget Plan with an "inertial" scenario, without including the extension of some measures already confirmed by the Government, such as the reduction in VAT on food until June. In this sense, AIReF considers “it is likely that the Budget project will alter the inertial forecasts, as it is the main instrument of fiscal policy.” And remember that the European Commission "indicated in its evaluation the need to present an update of the Budget Plan when the PGE project for 2024 is known."
The Tax Authority recommends that the Ministry of Finance and Public Service begin work as soon as possible to develop “a realistic and credible medium-term fiscal strategy that allows the debt path to be placed on a downward trajectory” and that “meets the sustainability requirements.” that will foreseeably derive from the reform of the European fiscal framework.”
