On Friday 14 October, the Spanish and Portuguese governments published their draft budgets for 2017 that they have to submit to the European Commission by mid-October.
Spain still has a caretaker government so the draft budget for 2017 is simply an extension of the 2016 budget without any specific measures for cutting public debt. Based on a growth forecast of 2.3% in 2017, growth is expected to reach 3.6% of GDP in Spain next year. In August, when it granted Spain two more years to reduce its excessive public deficit (see EUROPE 11605), the Council of the EU asked the country to cut its deficit to 3.1% of GDP in 2017 and 2.2% in 2018.
The next Spanish government will have the job of giving details of measures that will help it reduce the budget by 0.5% of GDP (nearly €5 billion) to comply with commitments made by Spain at European level. A company tax rise is already scheduled for 2017, which might help convince the European Commission not to freeze various European Structural Fund monies earmarked for the country (see EUROPE 11643).
Portugal. The Portuguese government is expected to unveil a draft budget to reassure investors about its budget determination with the aim of reducing the public deficit by 2% of GDP (following a reduction of 2.5% in 2016). In August, the Council of the EU gave Lisbon until 31 December to get rid of its excessive public deficit.
Portuguese media say the centre-left government, backed by the far left, wants to get rid of the restrictions on pay and civil servants’ pensions, paying for the measures by introducing new indirect taxation measures or higher tax on property worth more than €500,000.
Like Spain, a possible freezing of Structural Funds monies is hanging over Portugal because it failed to take action with enough impact to properly reduce its public deficit from 2013 to 2015. (Original version in French by Mathieu Bion)