Friday, March 29

Political and economic uncertainty leaves the next Budgets in the wings


The Minister of Finance, María Jesús Montero. / ep

The Government will raise pensions and public salaries by decree in the event that there is an extension of the State accounts for 2023

Clara Dawn

“There is no plan B.” It is the message that the PSOE defends to make it clear that 2023 will arrive with new General State Budgets. Sources from the Ministry of Finance confirm that “we work with the same times as last year and we plan to approve the spending ceiling before the end of July.” That would be the first step to speed up high-tension negotiations, in which the clash between the coalition partners has become clear after the call by Yolanda Díaz for an urgent meeting of the government pact commission, after approving a credit of 1,000 million for defense spending.

The positions with United We Can are more than far away. And the idea of ​​a budget extension is no longer unreasonable, at a time when the impact of inflation on the revaluation of pensions and public salaries will also complicate the support of the different political groups for the Executive’s plan.

From the Ministry of Finance they insist that “the Budgets will be approved in a timely manner.” But the clock is ticking and, if an agreement is not reached within the legal deadline -which establishes that the draft is ready at the end of September for parliamentary processing in the last quarter-, the Government would be forced to an extension. A situation that is contemplated in the Constitution and does not entail sanctions from Brussels. “European funds would not be lost either,” confirmed sources consulted. “The items are assigned and the disbursement is subject to the fulfillment of certain milestones, although it would be necessary to see how it is technically established without new Budgets,” they indicate.

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Valentín Pich, president of the General Council of Economists, explains that the big problem would be the weak institutional image that Spain would offer in a year in which, in addition, it will assume the presidency of the European Union. “2023 is also an election year and in both cases it is important to give a powerful image of stability and that happens by having new Budgets, the main economic policy instrument of a Government,” he explains.

However, it would not be the first time that an extension has occurred. In 2012, 2017 and 2018 the budgets of the previous year were extended and then approved mid-year. And in 2019 -with two general elections- and 2020 -with the outbreak of the pandemic- those of 2018 were used. «As it was done then, the Government would pull decree laws to manage public accounts, especially in terms of revaluation of pensions and salaries of civil servants”, indicates Pich.

“It would not be credible”

But that does not mean that there is free road. Above all because “the extension would result in a document that would not be credible in an economic context completely different from the one that existed when the accounts for this year were approved.” In other words, the spending items by decree would have to be measured to the millimeter.

When the 2022 Budgets were approved, the Government estimated that the economy would grow by 7% this year, with inflation at an average of 1.6%. The new forecast after the coup of the war points to GDP growth of 4%, with average inflation of 7.2%.

It is precisely the escalation of inflation and its effect on taxes such as VAT or personal income tax that gives a certain margin to undertake greater expenses planned for this year and also for 2023. And, despite the economic slowdown, tax collection is it has shot up 19% through May. In total, 97,096 million euros, according to the latest data from the Tax Agency. It is the highest figure for the period of the entire historical series and implies 15,558 million more compared to January-May 2021. That is, with it the cost of investment for anti-crisis measures would already be covered.

The experts agree, however, that this extra impact due to inflation is temporary, so the Executive should not propose its new roadmap with the perspective that this cushion will be maintained. At least if you want to offer credibility to the accounts with which you should reduce the deficit to 3.9% of GDP in 2023, as agreed with Brussels.


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