The Government gives a margin of 11,000 million more deficit per year throughout the legislature

The Government of Pedro Sánchez gave a budgetary joy yesterday giving the signal that it plans to trigger spending in its mandate years, while assuming that, however, the slowdown will be more intense than expected and the slowdown in employment will be older

The Coalition Council of Ministers resigns from trying to reach the zero deficit in this legislature and has an additional margin of about 11,000 million euros on average from 2020 to 2023 by greatly slowing down the consolidation of state accounts.

This follows from the intense smoothing of the deficit path approved yesterday by the Council of Ministers on the already flexible road map that he presented to the European Commission last October. In that way, the deficit in 2020 was proposed to be reduced to 1.1%, in 2021 to 0.4% and as of 2022, to the dreamed of zero. Yesterday changed dramatically. The plan now is to lower this year to 1.8%; barely 1.5% and 1.2% in 2021 and 2022; and not lose 0.9 in 2023, last year of the legislature if Sanchez manages to exhaust it. The plan is to scratch a considerable margin every year to postpone the adjustment.

This flexibility will not imply, however, improving employment, because it no longer plans to close the legislature with an unemployment rate below 10% as last October, but above 12%.

A first unknown to assess this path is that the Minister of Finance, María Jesús Montero, still does not reveal how much was the deviation from the deficit target in 2019 . She softened the goal by committing not to exceed 2%, but some institutions such as the Bank of Spain estimate that it finally closed at 2.5%, which would explain a year lost in the adjustment and a sharp rise in taxes in 2020 to meet the even very smoothed path of approved deficit.

The kick-off is an increase in the expenditure ceiling in 2020 of 3.8%, which is about 5,000 million more than in 2019. It will go from 122,899 million to 127,609 million, according to the government plan . It is a percentage that more than doubles the growth of the economy expected by the Government itself . The economic vice president, Nadia Calviño, estimated that it will not exceed 1.6% when she bet in October that it would be around 1.9%.

This is the largest increase in the expenditure ceiling since 2014, except for the 4.4% increase that Sánchez attempted in 2018, but which did not materialize due to the budget extension.

Both Sánchez and Calviño had assured after the formation of the new Government that the commitment was «budget consolidation», but in 2020 it aims to lower the deficit to just 1.8% of GDP, which implies continuing to generate debt to finance to the state. In addition, it is not realistic, according to 18 study services consulted by the Foundation of Savings Banks (Funcas) that foresee that it will not fall below 2% this first year of the legislature .

The vice president justified yesterday in the Senate the smoothing so as not to jeopardize the already slowed growth. "I thought you were going to endure the pull and would be the representative of a certain economic orthodoxy," said the senator of the PP, José Manuel Barreiro, who attributed the increase in spending to mortgages with the investiture partners, including Podemos. "Continuing to pursue unreal and unattainable goals that endanger economic growth is not orthodoxy, it is irresponsibility," replied the economic vice president, implying that her own softened October goals are no longer realistic.

The Government needs the approval of the European Commission, although the responsible commissioner, Paolo Gentiloni, already told EL MUNDO last January that the rules of the euro had to be enforced in Spain "without aggravating the slowdown", implying that it will be flexibile However, the verdict of the markets remains in case of a new financial crisis, and the Government gives a message that it loosens the march to reduce one of the biggest deficit and debt of the Eurozone.

In the marked path, the Central Administration and Social Security renounce the surplus in the legislature, while the Autonomous Communities and municipalities must respect the zero deficit since 2022 and from now, respectively.

Montero said yesterday that one of the reasons for the imbalance is that the central administration will take over part of the Social Security hole . The new owner of this portfolio, José Luis Escrivá, argues that it is necessary to "visualize" that the current system deficit is lower than 1% of GDP to give a sense of sustainability.

Calviño maintains that the debt will not exceed 94.6% of GDP in 2020 - compared to 96% today - and aims to lower it by 90% as of 2023. Article 135 of the Constitution amended in 2011 pointed to it being already 60% at this point in the decade.

According to the criteria of The Trust Project

• GDP
• European Comission
• Social Security
• PP
• We can
• Senate
• Nadia Calviño
• Maria Jesus Montero
• José Luis Escrivá
• Spain
• Public deficit

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