Posted: Wednesday, December 2, 2020 6:31 AM
Cristóbal Montoro’s budgets come to an end. After successive extensions from 2018, if there is no surprise, the new accounts will be approved this Thursday in Congress. The intention is that before the end of the year all parliamentary procedures have been adopted and that 2021 be published with the budget of the government of Sánchez and Iglesias.
The budgets the coalition government has insisted on are necessary given the current changes. The pandemic has changed everything and those in Montoro are considering spending on policies that are not needed in this emergency. Even the former minister himself has acknowledged that his “are not designed to cope with a crisis like the current one” caused by the coronavirus.
Now, the debate is, for example, on how to channel the 140,000 million euros that will come from the European Recovery Fund agreed in July, an unprecedented injection of which 72,000 million will be lost.
Calendar for approval
Montoro’s accounts were definitively approved by Congress in June 2018, with Pedro Sánchez recently taking over as government president. They have remained in force until now due to the inability to achieve a sufficient majority. After successive extensions, they are the longest in the democratic history of Spain.
The process that began this week in Congress will culminate in the plenary budget debate to be held on December 22-23. “In such a way that between December 9 and 23, the Senate will have completed the processing of EMPs and they will be sent to the Congress of Deputies”, explains Ander Gil, spokesperson for the PSOE in the Senate, in the course of treatment, foreseeable, on December 29, thus putting an end to Montoro’s budgets.
Investment, expenditure and deficit
The general state finance bill for 2021 consolidates the “largest public social investment” in history, worth 239,756 million.
The government has approved the spending ceiling for 2021, which reached a record figure of 196,097 million euros: a historic increase of 53.7%. A figure based on a forecast deficit of 7.7% of GDP, which, according to the Minister of Finance, “does not allow comparisons with past years”, because it is triggered by the incorporation of part of European funds stimulus for the coronavirus crisis
In this sense, it should be noted that before the state of alert, Congress had approved a spending ceiling for 2021 of 131.437 million euros, 3% more than that established for 2020, while it was 127,609 million.
Historic crash of 11% of GDP
The Council also established deficit benchmarks for 2020 -11.3% of GDP, above the 10.34% sent to Brussels in April and the 10.7% reached in 2012- and 2021 -7.7% of GDP-, two years in which there are no official limits for the suspension of fiscal rules, also approved on Tuesday.
For her part, the economic vice-president, Nadia Calviño, downgraded the government’s economic forecasts, which now forecasts a historic drop in GDP of 11.2% this year due to the crisis, against 9.2% previously calculated. although the unemployment rate stands at 17.1%, two points of what was previously estimated.
For 2021, while “a strong economic recovery in the world and in the euro area” is expected, the executive estimates a GDP increase of 7.2%, above the 6.8% previously estimated. For next year, the unemployment rate would stand at 16.9%, also a little better than the 17.2% initially forecast, according to Calviño.
The European Commission has also given the green light to budgets. After evaluating the draft general state budget (PGE) for 2021, he considers in a report published a few days ago that the accounts are “in line” with his recommendations, but asks to pay attention to the levels of indebtedness.
“In general, Spain’s budget plan is in line with the recommendations adopted by the Council on July 20, 2020,” says the report signed by Economy Commissioner Paolo Gentiloni. Thus, the Commission supports the measures which have been taken by the government to mitigate the damage generated by the pandemic: ERTE, aid to the self-employed, public guarantees for ICO credits or certain specific tax reductions, among others.
However, Brussels is giving the government a wake-up call due to the high level of debt. “Given Spain’s level of debt and the challenges of high medium-term sustainability before the outbreak of the COVID-19 pandemic, it is important for Spain to ensure medium-term fiscal sustainability when it takes budgetary support measures “says the Commission report.
This support from Brussels is an important oxygen balloon for the Pedro Sánchez government, just as one of its most important positions, the 27 billion that the executive will advance from the European Union Recovery Fund, is in danger to be late.