S&P discredits Sánchez's reform plan and gives him a first warning for the deficit and debt




«For years it seems that in Spain there is not the necessary political force to face its structural challenges». While the Government is dedicated to trying to convince the media that the European Commission harbors "zero doubts" about its ability to successfully carry out the promised structural reforms and to properly manage the application of European funds, the qualification Standard & Poor's (S&P) has come to join the increasingly powerful
wave of national and international skepticism surrounding the Spanish reform plan
and investments.

S&P, whose ratings largely condition investors' views on the solvency of different countries, expressed this Thursday at its annual conference on Spain its skepticism about the effectiveness of major reforms structural issues addressed by the Government, labor and pensions, to boost weak Spanish productivity and has expressed concern about the lack of measures to contain the structural imbalance of public accounts, which, as he has warned, may condemn Spain to remain anchored in the
historical levels of public debt
that he presents today.

The head of sovereign ratings for Europe at S&P, Marko Mrsnik, has underlined that the future evolution of the rating of the Kingdom of Spain will depend on the future growth expectations of the Spanish economy, whose potential will depend critically on the effectiveness of the reforms adopted, and on the orientation of the budgetary policy. The director of the agency has assured that the agency's opinion regarding Spain in this regard will have a definitive milestone in the 2023 Budgets, in which they hope to see measures that serve to reduce the structural deficit of the Spanish public accounts.

Spain currently has a rating of A with a negative outlook. According to the S&P rating scale, the letter A identifies quality issuers but with a certain exposure to a deterioration of their financing conditions in the event of a change for the worse in the economic context. The negative warning implies that it could go down to the next step, BBB, which is the prelude to entering the always delicate field of investments considered risky or speculative. S&P will review Spain's rating on March 18.

Little depth of the reforms

S&P's view of the government's economic policy stance is far from enthusiastic. The rating agency does not hide that appreciates more risks on the flank of economic and budgetary policy than on the flank of the economic context, no matter how hectic it may be and no matter how much Spain is being hit particularly hard by the inflationary spiral.

After two successive budgets carried forward and despite the consolidation of a parliamentary majority that is allowing the Government to deploy its reformist agenda for better or worse, the institution continues to point out 'political uncertainty' as a risk for Spain. According to the head of sovereign ratings in Europe, this is so because the lack of solid parliamentary support from the main government party makes it depend too much on other formations and complicates things, which «also affects the depth of the reforms, which prevents them from being more structural».

They give as an example the labor and pension reform. Regarding the first, they assure that it will not contribute to improving the productivity of the economy and regarding the second, that it is hardly a parametric reform, «which will be insufficient to contain the financial burden for the public accounts of the pension system» and that delays the necessary measures to face a challenge that is irreversible.

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