The Spanish government will re-approve an “expansive” spending ceiling

“The spending ceiling will anticipate the most expansive budgets in the country’s history,” Labor Minister Yolanda Diaz defended on Monday. The words of the second vice president are not just one already seen of the rhetoric that has prevailed since the pandemic began, but they anticipate another record spending ceiling that the cabinet is scheduled to approve this Tuesday. This is a key step in drawing up the state’s general budget for 2021, which the two coalition government partners, PSOE and United We Can, will begin negotiating this week. “They will be public accounts to solve the problems that the country’s social majority has,” Diaz insisted.

The pandemic blew up the austerity response that accompanied the last economic crisis of 2008. That is why the government has finalized a limit on public administration spending, that is, the amount of money which can be spent, “expansive.” The spending ceiling approved by the Spanish government a year ago increased to 196,097 million euros, 53.7% more compared to the spending limit that existed when Sanchez entered government. In fact, the final figure even deviated from the forecast that the central government had set at a start of 127,609 million euros, before the start of the pandemic.

The spending ceiling is the maximum amount that the set of public administrations in the state can spend in a year. This includes the Spanish government and other state-level institutions, but also the autonomous communities and local bodies (town councils, provincial councils, county councils and others). The expansion of the spending ceiling is mainly due to the incorporation of a part of European funds. A year ago the funds meant more than 27 billion euros of the total spending ceiling. For now, the Ministry of Finance has not yet made public this year’s figure, but it is not expected to be less than 20 billion euros, as the estimate is to receive 75 billion between 2021 and 2023, provided that Spain complies with the commitments of the reforms it has agreed with Brussels.

No tax rules

This spending ceiling will be re-approved in a context of suspension of fiscal limits as a result of the extension of the safeguard clause in Europe and the suspension of the European Stability Pact until 2022, with the idea of ​​reactivating in 2023. For this reason, it has been a year since Spain suspended its fiscal rules and, therefore, the deficit, debt and spending targets. This means that administrations will not have to worry when it comes to containing their spending and, in fact, after the suspension of these rules what will not see the light of day exceptionally will again be the law of budgetary stability, as confirmed by sources in the Ministry of Finance in ARA. However, the Ministry of Finance, in charge of drawing up the spending limit, remains in the line of “responsibility”, more in the face of a scenario in which public debt continues to grow, and for this reason will be proposed again. in public administrations a “reference rate” of the deficit, ie an “alternative” to the deficit target, although it will not be mandatory, the same sources have explained to this newspaper.



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