On Tuesday 17 January, the European Commission gave a mostly favourable opinion to the draft revised Spanish budget 2017, taking the view that it is overall in line with the Stability and Growth Pact.
According to the European institution, the budgetary measures taken by the new Rajoy government – including an increase in corporate taxation – have significantly increased the likelihood that the targets for reducing the government deficit in 2016, currently standing at 4.6% of GDP, and the structural budgetary efforts (not including conjunctural effects) for 2017 will be met.
With Spain required to bring its government deficit down to 3.1% of GDP in 2017 in nominal terms, the Commission is nonetheless of the opinion that budgetary consolidation will be a touch above this, stabilising the deficit at 3.3%. Additionally, for 2018, it predicts that this deficit will be 2.8% of GDP whereas, according to the budgetary trajectory agreed upon at the European Council, the deficit should be brought down to 2.2%. In comparison to the autumn forecasts, there is an increased probability that the headline deficit target for 2017 will be met, but it will not be met next year, a source within the European institution commented.
The Commission "therefore invites the authorities to stand ready to take further measures should fiscal developments indicate a heightened risk of not fulfilling the Council's requirements". It also notes that Spain has made limited progress in reinforcing the national budgetary framework and in its public procurement policy.
After two general elections were held at the end of 2015 and in mid-2016, Spain was able to form a government in the autumn. The minority government of Mariano Rajoy sent the Commission a revised draft budget in December 2016. In 2016, Madrid, which comes under the 'corrective' plank of the Pact, narrowly escaped financial penalties and a suspension of its structural funds in 2017, for having failed to comply with the European budgetary rules between 2013 and 2015. (Original version in French by Mathieu Bion with Élodie Lamer)