11 oct 2018
Budgetary policy


The budgetary and fiscal policy will hinder the consolidation of the expansive economic cycle of the Spanish economy, CEOE said in a statement after the Council of Ministers, in which the Government tannounced the guidelines of the state budget for 2019. The budgetary policy increases social expenditures, makes no mention of expenditures on sectoral and investment policies and will include a tax increase, especially for the business sector.

Budgetary policy

Therefore, the budgetary and fiscal policy is not appropriate to enable the consolidation of the economic cycle due to the following reasons:

  • With such high public debt ratios, increasing current spending, i.e., spending that becomes structural, is an obstacle for the sustainability of public accounts in the medium and long term. One has to bear in mind that the forecasts for the Spanish economy point to a clear slowdown, with risks on the downside, in addition to the fact that the ECB will likely raise interest rates in 2019, which means higher interest rates for debt payments. We should recall that the current interest on public debt will reach €31.547 billion in 2018.
  • We disagree with the assertion that Spain has a tax revenue problem because in 2018 the expected collection will exceed the historical maximum recorded in 2007, year in which there was a budget surplus. It seems clear that, if revenues have recovered and, even so, we are running a deficit, it is because expenditures have not been contained. In conclusion, any increase in revenues should come from the increase in tax bases (increase in wealth of companies and citizens) and not through tax increases.
  • An increase in revenues of €5.678 billion announced. This estimate does not fit with the net collection impact of the announced fiscal measures, which we believe to be significantly lower.
  • The increase in the tax burden, especially to the business sector, reduces the competitiveness of the Spanish economy while introducing elements of legal uncertainty that will delay investment decisions, with an impact on the creation of employment in the private sector
  • The adoption of unilateral measures in matters that are being discussed in the European Union puts our companies at a competitive disadvantage.
  • Finally, there are no measures aimed at solving the great challenges of the Spanish economy, meaning more is spent, but there is no solution proposed for the underlying problems, such as the sustainability of the public pension system or the reduction of unemployment rate through the promotion of active employment policies. In addition, there are no specific proposals on sectoral policies, such as the industrial sector, infrastructures or transport.

It seems that the public deficit goals are still set at -2.7% of GDP for the current year and -1.8% for 2019, which implies a delay in the fiscal consolidation process. In this way, and despite the spending ceiling not having been approved by Congress for the 2019 Budget, the deficit goals for 2018 and 2019 to which Spain committed, set at -2.2% and -1.3% of GDP respectively, will not be met. This means that the deviation could amount to around € 6 billion per year.