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THE EURO ZONE

Time's up

Pedro Sánchez appears to think that the damage caused by his management of Covid will be repaired by spending vast amounts of money, most of which he still hasn't acquired

Mark Nayler

Friday, 30 October 2020, 14:39

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Pedro Sánchez's attempt to push a 2021 budget through parliament next month will be a severe test of his government's legitimacy and efficacy. Worryingly, though, the Socialist leader appears to think that the damage caused by his management of Covid will be repaired by spending vast amounts of money, most of which he still hasn't acquired.

This approach raises a number of problems, which will hopefully be seized upon by the opposition when the budget is presented to Congreso. The first problem is where the money will come from.

The government is talking about requesting a 27-billion-euro advance from the EU against future Covid loans and imposing tax hikes on corporations and high earners. Yet not only is the EU advance not agreed upon by Brussels as yet, the loans against which it's made are also far from approved: one wonders, then, how this non-existent amount can form part of next year's budget. As regards the classic left-wing move of targeting high earners and corporations, the usual free-market objections can be stated. Higher taxes, especially those imposed to fund controversial government initiatives, can also cause wealthy individuals and corporations to take their money elsewhere, or simply prompt them to find more ingenious ways to reduce their tax bills.

The second, more fundamental, problem is that money alone will not repair the damage caused by the government's disastrous handling of Covid. The funds need to be well spent, and deployed as part of a more considered, rational approach to the virus - one which doesn't depend on over-empowered police, questionable "safety" regulations or arbitrary restrictions on movement, such as that currently favoured by Spain's national and regional governments. Post-lockdown recuperation won't be driven by increased public spending, or at least not primarily - it'll be more dependent on letting the economy function as normal, on people being able to get on with their lives. Foreign minister Arancha Gónzalez can talk all she wants about Spain's recovery happening "as soon as possible", as she did in an interview with the Financial Times this week, but it should have started a long time ago.

Thirdly and most importantly, this is a test that Sánchez should not be allowed to flunk. If he fails to pass a budget for a second time, his term should be up and the polls should be opened. It was, after all, the Socialist leader's inability to pass a budget that triggered the April 2019 election, which was so indecisive that another one was required seven months later.

If Sánchez can't get this one through, serious doubt will have been cast on his ability to pass legislation through the proper parliamentary procedures, as opposed to using Royal Decree - the no-votes-necessary mechanism that he's much too fond of.

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