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THE EURO ZONE

Running over budget?

Pablo Casado, president of Spain's corruption-scarred Popular Party (PP), has made his first attack on the Socialists' proposed 2019 budget. In an interview with the UK's Financial Times this week, the Conservative leader said the spending plan outlined by Pedro Sánchez - which includes an array of expensive welfare policies - is "technically incorrect, political undesirable and economically suicidal".

Casado is also concerned that the budget violates EU-imposed budgetary targets, arguing that it will be seen as too reckless by Brussels officials. The debate about the virtues of austerity, as a guiding principle for running Spain's economy, is about to start up once again.

One way in which Sánchez proposes to fund his spending increases is by lessening Spain's deficit-reduction goals with the EU for next year. Under Mariano Rajoy - who Sánchez removed from office with a no-confidence vote back in June - the Conservatives agreed a target of 1.3% for 2019; the PSOE leader, however, wants it to be 1.8%.

There are already signs that the Commission - perhaps wary of Italy's projected 2019 budget - is getting nervous about this suggested revision: in a letter sent to the Sánchez administration last week, Brussels fretted that the inflated public expenditure showed "a risk of deviation from the required [deficit-reduction] effort".

Italy's current battle with the EU indicates that now is not the time to test Brussels' patience: this week, the EU Commission asked Giuseppe Conte's populist administration to revise its proposed 2019 budget, which it said showed "particularly serious non-compliance" with its targets. Conte's government has three weeks to rein in its projected levels of public spending, or it risks being fined by the EU (one wonders if this would only be a "symbolic" fine, like the absurd €0 penalty Spain incurred in 2016 for the same reason).

Sánchez's opposite number, meanwhile, is at the helm of a party that has prided itself on championing austerity measures. Casado's predecessor, the ousted Rajoy, claimed that it was only by drastically reducing public spending that he was able to get Spain's economy back on track in 2012.

Yet the PP's critics (chief among them Sánchez's Socialists) point out that the Conservatives' cutbacks, although popular with Brussels-based economists, resulted in poverty for thousands of Spanish households, an insecure labour market and a widening of the gap between rich and poor. The PP's austerity measures didn't even keep Spain in-line with EU budgetary targets: under Rajoy, the Spanish government missed every single one of its annual deficit-reduction goals.

Sánchez will be preparing himself for potentially tough negotiations with the EU, while the latter cracks down on another southern European country that's asking for more relaxed deficit-reduction targets. As the Socialist leader tries to pass his 2019 budget, the pros and cons of austerity economics and the validity of EU fiscal targets will dominate economic debate in Spain.