The Government needs room for the next few Budgets. So I will try to scrape the most of the fiscal rules in the community to smooth the path of deficit reduction this year and the next two. The vice-chair Nadia Calviño will meet next week in Brussels with the commissioners Valdis Dombrovskis and Paolo Gentiloni to address the possibilities of relaxing the pace at which it closes the hole in the public accounts. Brussels does not want to make any comments before listening to Calviño, although community sources believe that in Spain there is not much margin for delay settings.
The vice-president of economic give account on the following Monday to his european partners on the guidelines of the new government of Pedro Sanchez. According to sources in the Ministry of Economy, Calviño not will still to their counterparts of its intentions to ask for arnica for the trimming of the deficit. Defend that “budgetary discipline and structural reforms are compatible with inclusive growth”.
And diplomatic sources believe that there will not be just discussion: Spain is still growing, although more slowly than the desired one, the deficit is still shrinking. Will be, therefore, outside the Council where Calviño will Dombroviskis and Gentiloni. The vice president wants to know how far open the hand to Brussels to set a new path of deficit of face to 2020 and the following two years.
In reality, the adjustment for 2020 was already approved by the Council of european leaders and, therefore, it cannot be changed. This requires measures that reduce the deficit in a permanent manner by value 0.65% of GDP, the equivalent of about 8,000 million euros. However, the Spanish Government can try to turn it up the greater leniency afforded by the european rules once it has come out of the guardianship by the excessive deficit.
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The Government faces the legislature, with a narrow budget The Fiscal Authority looks unlikely that the Government will comply this year with the deficit target Brussels apercibe to Spain by the risk of overshooting the deficit and the debt The Government rebate of one-tenth its growth forecast for this year to 2.1%
These rules allow you to breach up 0.5 points of the adjustment in two years. In 2019 Spain also had to make an effort to 0.65% of GDP. But nothing was done and, in consequence, he ate all of that margin. Now, the Executive of Sanchez will argue that last year was a special exercise, as it was in functions, it was unable to approve the Budgets and there was a slowdown of activity. That is to say, be asked not to take into account 2019 and reset the counter. This would allow to include in the Budgets a nod to podemos and other parties. Although it is not a question of large amounts, as the rise of pensions and public sector salaries will eat up a good part of the increase in revenue. Especially when in addition this year has entered into force, article 135.2 of the Constitution, which obliges them to stick to what they send to Brussels.
The Government will also be asked for margin on the basis that the economy still has idle resources. Esgrimirá a low inflation, surplus external and a high unemployment to argue that the economy is not overheated. Therefore, the structural deficit —one that is fixed by the location of the cycle— in reality it would be less than that calculated by the Commission. And the adjustment required should be reduced.
in Addition, there is the precedent of what happened with other countries in a fiscal situation similar to Spain. Last October, several Governments presented plans that rushed the permissiveness of the Commission, without getting out of it so that this does not return the Budgets. This was the case with France, Italy or Finland, from whose Budgets the Executive community and warned against the risk of non-compliance but on the outcome of which cannot be pronounced until the closure of the exercise. Italy and France justified by the need to address the social emergency and address the economic context.
the Risk of diversion
In this way, Spain could well do something similar and refer a bill with an adjustment on the paper around 0.4% of GDP. The Commission would dispute the figures and arrive at the conclusion that in truth there is only one adjustment small 0.2% of GDP, or 0.1%. Especially because many of the taxes raised will be put in place and will have problems to be applied. Even so, the community Executive will assess that there is some correction and will not return the accounts to rehagan.
yes: Brussels will state that appreciates a significant risk of diversion and claim the Government to be vigilant and take advantage of all the extra income to lower the deficit and the debt. In any case, the accounts are not reviewed until the following year.
Until now, the path that had been raised by the Government of Sánchez contemplated a reduction of the deficit from 2.5% of GDP in 2018 up to 2% in 2019. That 2% was a goal already self-imposed by the Executive socialist: in the path of stability that is approved in 2017 the Parliament still contained a target of 1.3% for 2019. But in the Budgets of 2019 that Sanchez failed to approve was changed to 1.8% because it was considered that the objective of the legislation was very difficult to achieve. Later, the president announced that the deficit would stand at 2% and not 1.8% to not have a Budget. In these moments the Tax Authority is expected to finish at 2.2% and the Bank of Spain, at 2.4%. Too close to the 2.5% in 2018.
To 2020, the Economy was estimated that in a scenario without measures, the deficit would end up at 1.7% of GDP. Just that it had that in 2019 there would be a shortfall of 2%. With respect to 2021, Calviño yes you will be able to renegotiate in may, the size of the adjustment, as it is not yet fixed by the european leaders.
The EU calls on Spain to send the accounts as soon as possible
According to Economy, the strategy shifts for the next week Calviño put the bases of a fluid communication between Madrid and Brussels to go accommodating the maximum measures of income and expenditure. Despite the fact that some members of the Executive of Sanchez have approached already to Brussels about his intentions, still has not been an official communication in this regard. For this reason, the European Commission refuses to rule on other possible relaxation of the deficit targets.
Even so, community sources indicate that there is not much interest in giving a lot more rope, and remind us that, far from opening the hand, the most recent evaluations have been more harsh with Spain, who have asked for compensatory measures to mitigate counter-reforms as linking pensions to the CPI.
A high-ranking official recuerdto, in addition, that Brussels has urged Spain to bring a Budget to the Commission and the Eurogroup as soon as possible. “The correct order is for the Government to present a budget plan, that the Commission make a finding and the Council for discussion. Not the other way around,” he said.
diplomatic Sources ruled out that within the Eurogroup may have greater strain if Spain is trying to rush the rules to spend something more. What is important is that the deficit will continue falling according to the rules of the Stability and Growth Pact. In case of infringement of this, the conflict then yes that would be served as it happened with the previous Italian Government.
