BRUSELAS, 22 Nov. (EUROPA PRESS) –
The European Commission has given its approval to the budget plan presented by the Spanish Government for the 2023 financial year, considering that it follows the recommendation of prudence in current spending while the common fiscal rules that set a maximum public deficit of 3% remain suspended. of GDP and a debt of 60%, but warns of the need to focus energy measures on vulnerable households.
This recommendation urged Belgium, France, Greece, Spain and Portugal to ensure prudent fiscal policy by limiting the growth of domestically financed primary current spending below potential output growth over the medium term, a suggestion that all five countries have followed. .
The public deficit is affected by the measures adopted to offset the economic and social impact of the exceptional rises in energy prices, which aggravated the budgetary cost, which according to the Commission’s autumn forecasts amounts to 1.6% of GDP in 2022 and 0.0% of GDP in 2023 since most of the measures have been legislated as temporary and expire at the end of 2022.
In this sense, Brussels warns that a prolongation of these measures or the introduction of new ones may contribute to greater growth in net current spending financed by the State and, consequently, to an increase in the public deficit and debt forecast for 2023.
For this reason, the Commission urges governments to better focus these measures on the most vulnerable households and exposed companies, to preserve incentives to reduce energy demand, and to be withdrawn when pressures from energy prices energy decrease.
The public debt to GDP ratio is very high and the fiscal deficit is sizeable, despite a slight improvement, while the unemployment rate, while still high, is already below pre-crisis levels and it is expected to remain stable next year.
Brussels has verified that the Spanish economy continued to expand in 2022 despite the growing disturbances caused by Russia’s aggression against Ukraine, but a rapid slowdown is expected in 2023 amid high uncertainty with downside risks.
According to the Commission, the general government balance in 2022 has improved thanks to strong revenue performance, but the high underlying deficit and high level of high debt remain a source of vulnerability.
Meanwhile, the banking sector has remained resilient, as potential cliff effects following the expiration of public support measures deployed during the pandemic period have not materialized, but Brussels indicates that spillover effects from increased energy prices and interest rates warrant close monitoring.
ALERT MECHANISM
For this reason, this year’s Alert Mechanism Report concludes that in-depth reviews of both Spain and nine other Member States that were subject to an exhaustive review in the previous annual surveillance cycle of the macroeconomic imbalance procedure are justified. as well as the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Luxembourg and Slovakia, which were not subject to an in-depth review in 2021-2022.
On the other hand, the monitoring reports after the program for Cyprus, Spain, Greece, Ireland and Portugal conclude that the five Member States retain the ability to repay their debt.
In addition, the recommendation calls on the eurozone countries to take individual measures, including the application of their Recovery and Resilience Plans, and also collective measures within the framework of the Eurogroup, in the period 2023-2024, to guarantee a common and coordinated fiscal policy. , maintain public investment, supervise salary and social policies, improve the business environment and preserve macro-financial stability.
“Our proposed recommendation for the euro area tries to navigate an ocean of uncertainty by translating this common agenda into five tailored recommendations for the soon-to-be 20-member euro area,” said Economy Commissioner Paolo Gentiloni. , at a press conference, referring to the entry of Croatia into the eurozone from January 1, 2023.
DEBT IMBALANCES
On the other hand, the Commission has alerted Spain that the debt ratios of households and non-financial companies, public administrations and external debt in relation to GDP continue to be “worrying”.
In this sense, Brussels indicates that although these variables have resumed their downward path after the COVID-19 crisis, they may experience a solid fall in external and private debt in a context of strong nominal GDP growth.
NEXT STEPS
The European Commission will present its proposed recommendation on the euro area at the Economic and Financial Affairs Council (Ecofin) on December 6. The proposal is expected to be discussed by the Eurogroup next January, approved by the Council in March 2023 and, later, formal adoption by Ecofin.
Member States will need to take action based on the recommendation both individually and collectively within the Eurogroup to implement the euro area recommendation in the period 2023-2024.
