The COVID-19 pandemic and its economic consequences have destroyed Spain’s public accounts. The Minister of Finance and government spokesperson, Maria Jesús Montero, announced on Friday that the deficit will rise to 10.34%, some 115,671 million euros, and the public debt to 115.5% of GDP due to the spending necessary to fight against the coronavirus and the fall in income due to the stoppage of activity, as stated in the Stability Program 2020-2023, together with the National Plan of Reforms that the Government has sent to Brussels.
The hole that the Government foresees in public accounts is much larger than the IMF’s forecasts, which it predicted that Spain ends 2020 with a deficit of 9.5% and that the debt rises to 113% of GDP. Despite the enormous increase in the deficit – we must bear in mind that in 2019 it closed with red numbers of 2.8% – in 2012 the financial crisis caused it to close that year with negative accounts of 10.7%.
Montero has explained that the measures of aid to families and workers as well as the liquidity facilities that have been offered to companies will make ePublic spending rises to 51.5% of GDP, 10 percentage points than in 2019, which translates to 576,714 million euros, while revenue will plummet by 25.7 billion due to the drop in activity, to 41.2% of GDP, 2.1 points more than last year.
As Montero has shown, the Government was aware that the sharp drop in public income and the increase in public spending derived from COVID-19 was going to increase the deficit and public debt to levels unknown in democracy, although it also expects that Brussels It has confirmed that it will give flexibility regarding the demands of budgetary stability.
The breakdown of the cost of measures to alleviate the pandemic amounts to 138,923 million euros, which corresponds to 104,400 million dedicated to facilitating liquidity for companies and the self-employed, another 28,403 million in social and health spending, while 6,120 million are due to a reduction in income.
Despite the terrible figures that Montero has announced, the minister has assured that the Executive of Pedro Sánchez does not consider that “adjustments in the public sector” have to be made, as the Government of Mariano Rajoy did during the financial crisis with the decrease of salaries of officials. The minister has indicated that the government’s plans are now based on “stimulating internal demand and activating the economy, but with the premise of maintaining wage incomes.”
Both the Minister of Finance and the Vice President of Economic Affairs and Digital Transformation, Nadia Calviño, have insisted that in order to alleviate the situation of public accounts, it was necessary to approve two tax figures that are now in Congress, the digital activities tax and the financial transaction rate.