Brussels – The European Commission has given its backing to Spain's fiscal adjustment plan, which aims to reduce debt and deficit levels over seven years, despite the absence of a draft budget from the government. Consequently, the Commission is currently unable to evaluate whether the fiscal policies for 2025 align with its recommendations.
The plan stipulates that by the end of the adjustment period, public debt should be on a declining trajectory and remain below 60% of GDP in the medium term, while the deficit must not surpass the EU's 3% GDP threshold, which has been reinstated after a four-year suspension due to the pandemic.
According to the Spanish Government's projections, debt is expected to decrease from 102.5% in 2024 to 98.4% in 2027; however, it will remain above 90% in 2031, when the adjustment period concludes. Although this establishes a downward trend over the coming years, the government has not indicated when the debt will drop below the 60% threshold.
Based on these commitments, the European Commission finds that Spain's plan aligns with the requirements of the new fiscal framework, presenting a “credible” trajectory that ensures a continuous reduction in debt.
Furthermore, the Commission believes that Spain qualifies for an extension of its adjustment period from four to seven years—similar to the extensions granted to Finland, France, Italy, and Romania—due to reforms such as those related to work visas and job search systems.
Regarding the deficit, the Commission asserts that Spain will close 2024 with a figure of 3%. However, it raises concerns about the risk of not achieving the deficit reduction targets outlined in the adjustment plan, as forecasts predict a deficit of 2.6% for 2025, slightly above the planned 2.5%, and 2.7% for 2026, surpassing the commitment of 2.1% by six-tenths.
Brussels relied on the projection that Spain would end the year at 3% to spare the government from entering an excessive deficit procedure, despite finishing 2023 with a deficit of 3.5%, exceeding the threshold set by fiscal rules.
In contrast, the Commission is set to initiate excessive deficit procedures for Belgium, Slovakia, France, Hungary, Italy, Malta, Poland, and Romania, which will be required to undertake corrective measures.
Next, the Council must approve the proposed plans, after which the Commission will oversee adherence to the commitments made throughout the duration of the plan. Member States are required to submit annual status reports for this monitoring process. (November 26)
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