Brussels asks Spain for "additional efforts" for a "credible" reduction of debt and deficit


Brussels asks Spain for "additional efforts" for a "credible" reduction of debt and deficit


The European Commission has asked Spain to make an "additional effort" to develop a "credible" fiscal strategy that guarantees a "significant" reduction in its high levels of public debt and structural deficit, as it considers that political action in this regard has been "limited" in recent years.

"An additional consolidation effort is necessary for Spain to achieve a healthy budgetary position," says the report from the Community Executive published this Monday that evaluates the main vulnerabilities and macroeconomic imbalances of Spain and five other member states.

To guarantee a reduction in debt in the medium and long term, Brussels warns that it will be necessary to "clearly reduce the structural deficit", while recommending addressing "future budgetary pressures on the spending side related to the aging of the population, as well as with health and long-term care.

The report points out that "the implementation of a credible consolidation strategy could take advantage of and complement the set of reforms planned within the framework of the recovery and resilience plan, focused on both expenses and income, and which are expected to contribute to reducing the overall budgetary vulnerability of Spain in the medium term".

The Commission's macroeconomic forecasts estimate that Spanish debt will decline to 106.5% in 2024, while the deficit is expected to fall from 4.1% to 3.2%, still above the thresholds required by fiscal rules. of the EU - 60% for the debt and 3% for the deficit -, which will be applied again from May with a new framework, while the member states must present their medium-term fiscal plans on September 20.

Although the report recognizes that "important progress" has been achieved in the last decade, it insists that "greater efforts are necessary, especially to reduce the high public debt," to which the medium-term fiscal strategy will contribute.

On the spending side, the Commission welcomes that Spain began to implement the recommendations made in the spending reviews carried out by the independent tax authority (AIReF), while with regard to income, the evaluation indicates that some measures already adopted They are contributing to the increase in public revenues and helping to reduce the gap with the EU average.

Brussels points out that once implemented, policies aimed at reducing Spain's dependence on energy imports and increasing the competitiveness of the business sector will contribute to further reducing external vulnerabilities, which will also be helped by some measures of the recovery plan that address public budget expenditures and revenues, as they will accelerate the downward trajectory of the public debt/GDP ratio.

Furthermore, the report indicates that both previous and current labor market measures "have demonstrated, and continue to demonstrate, their effectiveness in reducing the number of temporary employees and unemployment."

In this sense, the Commission has confirmed that the labor market reform approved in December 2021 has contributed "decisively" to the reduction of temporary employment in the private sector, although it also requests that the necessary measures be taken to address the " persistent and high" proportion of temporary employees in the public sector.