Brussels endorses Spain’s fiscal adjustment plan despite the lack of budgets

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Brussels – The European Commission has endorsed the credibility of Spain’s fiscal adjustment plan on Tuesday, which sets commitments to reduce debt and deficit levels over a period of seven years, despite the government not yet presenting its draft budget, so it cannot currently assess whether the fiscal policies for 2025 align with the recommendations.

The trajectory must ensure that, at the end of the adjustment period, public debt is on a declining path or remains below 60% of GDP in the medium term and that the deficit does not exceed the 3% of GDP threshold required by the EU’s fiscal rules, reactivated after being frozen for four years due to the pandemic.

In its plan, the Spanish Government anticipates that debt will fall from 102.5% in 2024 to 98.4% in 2027, although it will remain above 90% in 2031, when the adjustment period ends. In this way, it outlines a downward path over the coming years, although it does not specify when the debt will be reduced below the 60% threshold.

Based on these commitments, Brussels considers that Spain’s plan meets the requirements of the new fiscal framework by establishing a “credible” trajectory to ensure a “continued” downward path of debt.

Additionally, the European Executive believes that Spain meets the criteria to justify an extension of the adjustment period from four to seven years — similar to Finland, France, Italy, and Romania — based on reforms such as the work visa and job search system.

Regarding the deficit, the Commission maintains that Spain will close 2024 with 3%, but warns of the risk of failing to meet the deficit reduction committed to in its adjustment plan, as Brussels’ economic forecasts predict 2.6% for 2025, a tenth above the 2.5% outlined in the plan, and 2.7% for 2026, exceeding the 2.1% of the acquired commitment by six tenths.

Brussels relied on the guarantee that Spain will end the year at 3% to save the government from an excessive deficit procedure despite ending 2023 with 3.5%, five tenths above the threshold required by fiscal rules.

However, the Commission will open an excessive deficit procedure for Belgium, Slovakia, France, Hungary, Italy, Malta, Poland, and Romania, which will be subject to corrective measures.

Now, the Council must approve the plans and, upon obtaining its approval, the Commission must monitor whether the member States respect the commitments made during the entire period covered by the plan, for which the capitals must submit annual status reports. (November 26)

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