It is not the first time that Independent Authority for Fiscal Responsibility (Airef) slaps the government on the wrist at the cost of
sustainability of public finances. But it is one of the occasions in which the institution has been tougher, confronting the strategy that the Executive is following. And it has done so with the figures in hand, putting on the table that in 2024, for example, the deficit will still be at 3.5% of GDP and that the debt will stagnate even beyond 112%.
Cristina Herrero has appeared this afternoon in the Finance Commission of the Congress of Deputies, beginning by pointing out that “the suspension of fiscal rules does not mean that fiscal supervision is suspended.” Brussels has given Member States wide sleeve since the start of the pandemic and extended the fiscal ‘free bar’ until 2022, but this will have to be reviewed in the spring. There the situation could change, leaving Spain in a very vulnerable situation.
The leader of the Fiscal Authority has claimed to be aware that deficit and public debt rules will have to be met sooner or later. Either in 2022 or 2023, this last year being the most likely. But, in his opinion, it is urgent and necessary to prepare for that scenario now.
“The fiscal rules are suspended but we do not know to which rules we are going to return and at what time. It is a mistake to leave this planning until this is cleared“, He commented, to delve into the need to plan a medium-term fiscal plan now, because if we wait until 2023 and the new orthodoxy arrives,” it will no longer be a necessity but an obligation.
Thus, the Airef recommendation is clear in this regard, but the response given by the Government has not satisfied its ‘hunger’ for fiscal consolidation. As Herrero has revealed, the Executive has communicated to the institution that the path is already downward “thanks to the improvement of the cyclical component”, which denotes that Moncloa does not have a strategy for the deficit and debt, it is not expected.
A few weeks ago, the Government received the go-ahead from the European Commission for the recovery plan. Three years from now, more than 70 billion of euros in transfers to transform the Spanish economy. But, in any case, there are still great doubts about this plan.
Herrero, in Congress, stressed that “the reforms that are detailed in the plan have yet to be finalized,” while expressing doubts about the pace of execution of European funds. In this sense, he pointed out that there are “doubts” about the impact it will have in 2021 and whether it really will not have to carry over its effect to 2022 and 2023.
Likewise, the president of Airef has demanded a correct selection of the projects, that there be no delays in their implementation, that there be coordination between the Public Administrations and that there is also collaboration with the private sector. “Only in this way could we get closer to the impact targets,” he commented.