The European institutions, from the European Central Bank Even the EU's Fiscal Council has been holding the most indebted countries for months to speed up the process of debt reduction. The European Commission insists on this in its latest Report on Fiscal Sustainability, which indicates the "high risk" that debt will become chronic in the medium term in seven states: Belgium, Spain, France, Italy, Hungary, Portugal and the United Kingdom.
The Council of Finance Ministers of the EU (Ecofin) will vote on conclusions, whose draft has been accessed by EL PAÍS, which warn of the effect of demographic changes on indebtedness and urges countries to "avoid" the "reversal of reforms that have already been undertaken "and to ensure the sustainability of the pension system by increasing" the effective retirement age ".
The report analyzes the fiscal viability of the Member States in the short, medium and long term. The situation a year ago only concerns the Commission in the case of Cyprus, which in 2018 resorted to markets more frequently to support its banks. Although on paper they are out of risk, Spain, France, Italy and Hungary are also under scrutiny. The conclusions of the Ecofin, which have been sent to member countries, highlight that "high or rising levels" of debt of these countries are "important sources of vulnerability" if they change the "perceptions" of the markets in the current context of volatility financial
Red traffic light to Spain
The alarms are lit, however, in the medium term examination. In the next decade, the Commission does not contemplate that neither the EU nor the euro zone can return to the situation prior to the Great Recession and, overall, its debt will remain above 60% of the GDP provided by the Stability and Growth Pact . Furthermore, it highlights that these seven countries face a "high risk" of fiscal unsustainability until 2029 due to their "weak fiscal position", the "inherited burdens" or their sensitivity to shocks economic
In the case of Spain, the European Commission foresees a deterioration in the primary structural balance -the result of discounting the interests and effects of the economic cycle- in the next two years, with a deficit of 1% of GDP. This starting scenario complicates the projection of the Spanish debt, which only with an almost unlikely structural adjustment of 5.2 percentage points in five years could place the debt below 60% in 2033, according to the EU executive. In any case, and after examining several scenarios, the Commission turns on the red traffic light for Spain.
In a scenario of "normal economic conditions" and without changes in fiscal policy, Brussels estimates that Spanish debt will rise to 107% of GDP in 2029 due to the costs derived from population aging and interest rates above the rate of increase. The context outlined by Brussels goes through an annual GDP expansion of 1.2% and an inflation of 1.9% between 2018 and 2029. The report also presents two alternative scenarios. In case of a shock financial, the debt could fly up to 113% of GDP. At the other extreme, if Spain closed the next ten years with an annual primary surplus of 1.8%, it would lower it to 76.7%, and if this were 1.1%, the debt would be lower than that threshold " key "of the 90% that would allow him to get out of that risk situation.
Unlike other years, the report also concludes that in the long term, beyond 2029, the fiscal sustainability of Spain is also in a situation of "high risk". The document indicates in this section the initial position of public finances and the costs of population aging. And, in addition, he warns that "a reversal of the recent pension reforms" would worsen those prospects. The Spanish fiscal position does not contribute either, the report concludes, the external indebtedness or the doubtful credits that still drag the bank.
The European Commission's report points out that, although projections indicate a reduction in debt in the euro area as a whole, it masks differences between countries. And he points out that a small group of countries, which are really big economies, will continue with high volumes in ten years. In addition to Spain, there are Italy (from 131.1% to 146.5% of GDP), Belgium (from 101.4 to 99.9%), France (from 98.7% to 98%) and Portugal (from 121%). , 5% to 107%).
The draft conclusions of Ecofin next week stress that the reforms help create an "environment" favorable to fiscal consolidation, calls for "adherence" to community tax rules and highlights the "positive impact" of "comprehensive reforms" that take into account the aging of the population for the sustainability of long-term debt.