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THE EURO ZONE

Put it to a vote

Despite the Socialist government's belief that the spending plan's more relaxed deficit-reduction targets didn't pose a problem, the EU Commission said this week that they flout Brussels' fiscal rules

Mark Nayler

Friday, 23 November 2018, 16:38

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As was inevitable, Spain's proposed 2019 budget has failed its first major test with EU officials. Despite the Socialist government's belief that the spending plan's more relaxed deficit-reduction targets didn't pose a problem, the EU Commission said this week that they flout Brussels' fiscal rules - something that Spain is has done repeatedly over the last few years. A welcome consequence of this latest EU reprimand, though, is that prime minister Pedro Sánchez is finally considering early elections.

Cooked-up in collaboration with leftist Podemos, the Socialists' projected spending plan contains expensive welfare policies, funded by increased taxes and altered deficit-reduction goals. As such, it's been a source of concern for EU officials ever since they received the draft budget last month; indeed, towards the end of October, the Sánchez administration received a warning letter in which the Commission said that its proposals showed "a risk of deviation from the required [fiscal] effort".

EU officials are particularly worried about the deficit reduction goal for next year. Under the previous Conservative administration of Mariano Rajoy - whose budget Sánchez will have to fall back on if he can't get his own passed - the agreed target was 1.3%. The Socialists initially proposed altering this to 1.8%, but after reviewing the draft 2019 budget, the EU is concerned that the actual figure for 2019 will be around 2.1%. Brussels has also criticised the PSOE-Podemos proposals for deviation from targets set by the Growth and Stability Pact, which aims to regulate EU members' public finances and economic policies.

Sánchez has budget-related problems closer to home, too. Even if the EU had no objections to the proposed 2019 spending plan, the Socialists still need to secure its approval in congress - and with just 84 seats in the 350-seat lower chamber, that's not going to be easy. As foreign minister Josep Borrell said in a conference this week, "the big problem with Spain's budget doesn't come from Brussels, it comes from the opposition". Borrell was referring to the Socialists' arch enemy, the Conservative Popular Party (PP), which holds 134 seats in congress and is firmly opposed to increased public spending.

Possessing such a weak hold on power was always the main reason for Sánchez to call elections before his term expires in 2020, especially as his party is riding high in opinion polls. The recent budgetary run-in with the EU seems to have finally convinced him that this is the way to go: Sánchez said that this week that if he can't get the 2019 spending plan approved, his "call to govern to the end of the term will be cut short". Given that such approval is unlikely, either from the EU or the PP, it's time he put his administration to a national vote.

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