Rating agencies see the future disbursement of European funds in jeopardy due to the political landscape

They warn of a "potential" repetition of elections and of a difficult processing of the Budgets in 2024.

Rating agencies see the future disbursement of European funds in jeopardy due to the political landscape

They warn of a "potential" repetition of elections and of a difficult processing of the Budgets in 2024


The election results of July 23 did not leave a clear winner to form a government, which for rating agencies and various investment firms opens a period of uncertainty that could affect the disbursement of European funds and future challenges and reforms of the Spanish economy.

And it is that, after the general elections last Sunday, the sum on the right of PP, Vox and UPN reaches 170 deputies, while on the left of PSOE, Sumar and other pro-independence formations it stands at 172. With this, the numbers do not match any of the blocks for an absolute majority of 176 deputies.

In light of this panorama, analysts and economists have ruled on the consequences of this political uncertainty in the Spanish economy. Above all, taking into account that in 2024 the fiscal rules will return to the European Union, suspended due to the pandemic, and Spain holds the Presidency of the Council of the EU during the second half of 2023.

One of the first agencies to speak out was S

It must be remembered that Spain has already received 37,036 million euros, the equivalent of 53% of the total that corresponds to it in the form of non-refundable transfers, which amounts to 69,528 million euros in the Recovery Plan. The acting government plans two payments of 10,000 and 7,000 million euros in 2023, another of 8,000 million next year, one of 3,500 million in 2025 and, finally, a final disbursement of 4,000 million by December 2026.


However, the agency believes that this electoral repetition should not, in principle, jeopardize the preparation of the General State Budget for 2024.

The credit rating agency DBRS Morningstar does not think the same about the public accounts, which does believe that the political panorama can "hinder" the approval of the General State Budget (PGE) of 2024, the year in which, in addition, it is expected that reactivate the fiscal rules of the European Union.

In addition, the agency also considers that a rapid execution of the Recovery Plan could be "complicated", as well as the disbursement of European funds and even slow down a "necessary" tax reform.

Although it observes a slowdown in the Spanish economy, the firm is confident that it will outpace the growth of the other major European economies this year and that the overall growth of the economy will remain stable.

For his part, the Moody's Analytics analyst, Luis Enrique Silvia Yanez, warned that, regardless of the government resulting in the future, the new Executive will face a "weak" economy with challenges such as "high structural unemployment and high levels of the country's debt", which leave "little fiscal space" for support programs.

The British bank Barclays also spoke about the electoral result. Specifically, the bank analyst Mariano Cena warned of the risk of delays in the disbursements of the Next Generation funds and of "prolonged uncertainty" in a scenario of electoral repetition.

Cena also understands that the most likely scenario is an electoral repetition at the end of this year or already at the beginning of 2024. "In our opinion, it is most likely that there will be an indecisive Parliament and new elections will be called," said the analyst, to alert, yes, that this panorama, in addition to delaying the arrival of European funds, would also cause "prolonged uncertainty" in the economic sphere.

Who also spoke of uncertainty was the director of public and sovereign ratings of Scope Ratings, Jakob Suwalski, who believes that the future government will be structured in an environment of "fragility" and difficulties in carrying out economic reforms during the Legislature.

"Given this backdrop, Spain, which presides over the Council of the EU until the end of the year, faces a prolonged period of uncertainty," said the economist, who warned that any future Executive will foreseeably have "more difficulties in applying policies and long-term reforms, having to navigate the complexities of coalition politics.

But not all the firms that have ruled on the elections have done so in a key of risks and uncertainties. The investment bank Goldman Sachs expressed its confidence in the resilience of the Spanish economy, which in its opinion is greater than that of the rest of its European neighbours, regardless of the political future of the country derived from the last general elections.

More specifically, Goldman Sachs believes that, based on its Current Activity Indicator, the Spanish economy is more resilient compared to the rest of the European region. "The country seems to be well positioned to address these challenges even if the electoral process did not provide a conclusive result," reads an analysis by the investment bank.

The chief economist at Axa IM, Gilles Moëc, also expressed his confidence in the health of the Spanish economy in the face of a few months of possible political instability.

The analyst noted in a report that while Spain's political situation has not become more stable after the elections, its underlying position "is probably strong enough to see it through a few more months of uncertainty" if new elections are to be staged.

"Spain may continue to be some distance from the top of our concerns," said the analyst in reference to the country's economic situation.

However, Moëc also indicated that "not everything is rosy in Spain", since even if the deficit is under control, public debt will probably reach 111% of GDP this year, while the rise in interest rates will make the fiscal equation more difficult to solve in the coming years.