This call for an early general election carries significant economic implications and is shaping several stalled legislative initiatives. For instance, the plan to establish the Independent Authority of the Financial Client is being processed in the Senate. While Congress agreed to create an institution that actively monitors the rights and relationships between financial institutions and customers, it may not become a reality in the near term. Changes to the pension reform bill are also on the table, a priority as the Government has issued a decree to discuss vital issues.
In the Senate, regulation against food waste and a new civil service law remain in preliminary stages, awaiting committee reports. The government, deliberately, paused activities as directed by higher state authorities to forestall any substantial changes to access to public service, including entrance examinations and promotion regimes.
housing law
Another legislated area, sustainable mobility, is also stalled in committee. A broad reform of the transport sector will need a few more months, creating a window to address critical issues such as the competitive imbalance between road passenger transport and rail service.
Some already approved laws face practical delays as well, with housing policy offering a case in point. The sweeping regional and municipal political changes it would trigger threaten the Government coalition’s ability to declare stressed areas, identify tenants at risk, and manage local territorial competence effectively.
unsuitable conditions
With polls set for July 23, the Executive must confront several high-priority issues. Elections occur in a single day, a key date in the economic policy calendar, because preparations for the following year’s General Budgets hinge on approving the non-financial expenditure ceiling.
With election progress, Sánchez halts pending equality progress
In this context, the most probable outcome is that a new Budget for 2024 will not be ready until mid-year, as parliamentary deadlines, chamber formations, and government formation stretch timelines. As a result, mandatory deadlines for accounts due in August may be missed, delaying entry into force on January 1 of the next year.
Beyond this, the coalition government leaves future administrations with various short- and medium-term challenges. It must manage the tail end of a long period of monetary stimulus that has provided more resources to public administrations over the past three years than in their entire history, pushing the budget past the half-billion-euro mark in Spain.
Manage funds well
The first difficulty lies in translating the real-economy impact of the recent era into tangible results. The much-discussed NextGenEU funding wave requires faster deployment after nearly two years of implementation, amid administrative hurdles, a fuzzy regulatory framework, and general skepticism about the funds’ effectiveness within the business community.
Latest Recovery Plan portal figures show that actual disbursements from central government to companies and individuals barely reach 9,111 million euros, with only 4,200 million reportedly mobilized locally. This opaque execution makes scrutiny difficult, a concern echoed by the European Parliament Control Commission, which notes terminological confusion and disjointed subsidy agencies as factors hindering efficient funding.
The December government draft, coupled with the technical and administrative complexities of non-refundable money (69,000 million to be allocated by 2026), means the new Administration may seek a European Commission authorization for a repayable financing tranche of 84,000 million euros. Loans, paired with a more limited set of eligible agencies and potential partners such as the banking system and related institutions, could ensure quicker and more effective delivery to productive sectors.
settings are back
The forthcoming government will face a real budget constraint. This year, the eurozone is expected to realign with the Stability and Growth Pact, starting with a deficit around 4.8 percent and a theoretical path to 3 percent.
Inflationary dynamics may leave a sizable surplus in public accounts in 2023 through personal income tax, social contributions, and corporate tax. If 2024 inflation forecasts hold or if political shifts alter rate expectations and autonomous divisions persist, revenue growth could slow, necessitating tighter public spending.
In this context, a third challenge emerges: withdrawing incentives and inflation relief measures. As pandemic-era guarantees wane, default risks rise and the resulting budget costs grow.
rising inflation
Measures such as energy subsidies, fuel allowances, and tax relief on electricity, gas, and food have contributed to a projected CPI rise of about 1.5 points in 2024. Bank of Spain forecasts place inflation around 5.1 percent by year end if those measures end, with elevated inflation likely to persist into the following year.
In sectoral policy terms, the new Government faces a major energy agenda. If the next legislature lasts until mid-2027, it will mark the first nuclear decommissioning at the Almaraz plant. Decisions on radioactive waste management and revisions to the European Biodiversity Strategy will align with changes to hydroelectric power and energy market reforms, reshaping long-term contracts and storage strategies.
The call for early elections could drive notable shifts in Spain’s approach to energy markets, potentially accelerating investment in hydraulic storage, distribution and transmission networks, and more efficient market mechanisms for long-term contracts.