Who is going to pay for Pedro Sánchez's spending spree?

Who is going to pay for Pedro Sánchez's spending spree?

With a blank checkbook, without looking at his pocket. It will be for money. "I'll pay for this," don't worry, "you're all invited." This is how the economic measures that the candidate for the investiture sounded to a good part of the Spaniards, Pedro Sanchezhe reeled off in his speech in Congress before the incredulous gaze of the opposition bench and the underhanded acquiescence of his acolytes. No brakes on spending or an end to the free money bar available for the social economy that the acting president once again boasted about.

In its long list of economic proposals confirmed the extension of the VAT reduction on basic foods until June 2024, as well as that public transport will be free for minors and young people and for the unemployed; Maternity and paternity leave will be increased to 20 weeks from the current 16; The minimum interprofessional salary (SMI) will be approved to increase each year so that it remains at 60% of the average salary and the weekly working day will be reduced from 40 to 38.5 hours in 2024 and to 37.5 in 2025. In addition , labor flexibility and teleworking will be promoted; pensions will increase each year with the CPI; The youth rental bonus and guarantees will be increased to cover up to 20% of the youth mortgage; 183,000 affordable rental homes will be put on the market and half of the energy will be renewable in 2030. Everything is very pink – or very purple –, very progressive, very honey on flakes.

Above all because Sánchez has presented what, but has not explained how. That is to say, we know what his idyllic promises are going to be, but we do not know how it is going to be paid or what funds are available.

The budgetary impact of these measures will not be known until they are definitively approved. But, for example, the VAT reduction will cost around 1,450 million this year, and revaluing pensions will exceed 12,700 million. If the rest of the measures are added, the final figure could reach 20,000 million, if the costs of the SMI, social bonds, housing and others are added. And this additional expense will have to be financed with the application of additional tax measureseither by raising taxes or by reducing other expenses to balance the accounts and the deficit at the 3% of GDP that Brussels demands.

Anyone would sign these measures with a privileged financial position, with the economy in full swing, without dark clouds on the horizon, without a cooling of budding business activity and without the additional pressure that comes from Brussels, which demands to turn off the tap nowhe easy and uncontrolled money launched during the pandemic, because there is no longer a pandemic.

But Sánchez has done it again deaf ears to any calls for cost containment despite the "knock" of attention that came yesterday from the European Commission. Brussels, in its new forecasts, has "bought" only part of the macroeconomic picture of the Budget Plan that the economic vice president sent last month. Yes, the growth expansion of 2.4% is believed for this year, but the 2% projected in 2024 is considered "too optimistic." And why? Because the EU is now clearly suspicious of the path of fiscal consolidation outlined by the Government and predicts that Spain will fail to comply with the rules that force member states to maintain a deficit below 3% of GDP next year, especially when the Executive that leaves the investiture will have to extend the 2023 Budgets, which yesterday were already marked by the new social plan of the coalition Government.

The Executive maintains before the EU that the deficit will close at 3.9% of GDP this year so that, in 2024, in a scenario without additional measures and in which anti-crisis measures should disappear approved in the last legislature to comply with that 3% tax, regardless of whether there is an agreement to reform the economic governance framework in Europe. But, oh, surprise! Yesterday candidate Sánchez renounced his own Budget Plan and made promises to extend and expand a good part of the measures that should disappear right at the end of the year.

Even without Brussels being aware of the presentation of social benefits presented yesterday in Congress, the community "macro" report has already amends the path of the Government and warns that, without a fiscal adjustment of two tenths of GDP, this will remain above 3% of GDP until 2025 and, therefore, will fail to comply with the requirements. This year it would close at 4.1%, during the next it would only reduce to 3.2% and in 2025 it would rebound to 3.4%. That forecast without knowing the investiture announcements.

Just when Sánchez was presenting his arguments on the stand, the businessmen once again raised their voices against the signed agreements because "they will seriously condition future decisions on spending, investment, residence or tax domicile." From the Business Circle They demand "legal security" and "equality before the law." Sánchez offered more free bonuses and working less, which we will all pay for.