Pedro Sánchez faces the task of securing enough parliamentary support to push forward what the current coalition government deems essential for the General State Budget. The opposition parties PP and Vox have signaled plans to amend the entire text, and it remains unclear whether other traditional government partners, such as PNV or ERC, will join those efforts. A wave of proposed changes aimed at integrity could overturn the bill, as ERC did in February 2019, potentially pushing a budget extension from 2022 into 2023. Budget policymakers note that almost any measure can be revisited through royal decrees, yet each decree requires parliamentary approval by the same majority that previously discredited the General Accounts. Moreover, as Airef president Cristina Herrero argued before the Congress on Tuesday, the Budget risks losing its role as the main tool of economic policy due to diminished predictability and accountability.
2. How does a budget extension actually work?
When Parliament fails to approve the next year’s Budgets by December 31, the current year’s budget remains in force starting January 1. This situation has occurred repeatedly, not only at the national level but also in autonomous communities and municipalities. Before January 1, the government often issues a decree known as the “budget extension decree,” which consolidates the most urgent measures the Executive wants to implement on January 1, including any agreed salary adjustments. This approach allows continuity while negotiations continue.
3. What happens to public salaries?
Automatic budget extensions can freeze civil servant salaries relative to the previous year. The government has agreed with unions on a 2.5 percent salary increase, potentially rising to 3.5 percent in 2023. If an extension decree is issued before year-end 2022, the government may determine that urgent reasons justify implementing the agreed raise as of January 1, or even at a later date, in conjunction with related budget changes (credit supplements).
4. And pensions?
In this instance, an increase in pensions can happen without a special decree, driven by the Social Security Law. If the consumer price index (CPI) rose, pensions could be increased by about 8.5 percent effective January 1, 2023. This adjustment is considered a mandatory obligation funded by an expandable credit, meaning the payment obligation must be met even if there is no new budget. Unemployment benefits are another example of an expandable budget item.
5. What about anti-crisis measures?
The government has informed the European Commission of plans to deploy similar spending measures in 2023 to address the energy crisis and inflation, following measures totaling roughly 10,000 million in 2022. These include a 20-cent-per-liter gasoline bonus in 2022, energy sector aids, travel pass discounts, a higher Minimum Living Income, and other supports. A further package of 3,000 million was approved for 2023, valid until December 31, 2023. If there is no new Budget, these measures can be included in a royal decree law with the appropriate mandate, but a parliamentary approval remains required for any loan supplements or extraordinary financing.
6. Can tax refunds be extended?
The government may use decree-law to implement measures such as VAT relief for gas and electricity or other 2022-era VAT reductions tied to the energy crisis. Tax changes can be enacted by decree with Parliament’s approval, while creating new taxes requires a law. Proposals such as a new solidarity tax on higher wealth, or partial amendments to existing tax rules, could be introduced without a 2023 Budget. The ability to adjust taxes via decree exists even if a new Budget has not been adopted.
7. Will European funds execution be affected?
Payments for approved investments usually proceed even if a Budget extension occurs. However, allocating funds for new 2023 projects co-financed with European funds may be jeopardized if a budget is not approved. This situation can be resolved through royal decree laws and accompanying extraordinary loans, according to budgetary specialists. The rules aim to preserve continuity while maintaining fiscal discipline.
8. Are planned transfers to autonomies and municipalities impacted?
Generally, extending 2022 Budgets into 2023 means that transfers to autonomous communities will not grow by the anticipated 24 percent, instead risking a reduced increase. Yet, this gap can be bridged by decree-law, a strategy already used in 2019 when Finance Minister María Jesús Montero secured approval to address the issue through a decree-law while pursuing legal reforms to prevent future doubts.
These dynamics illustrate how budgetary instruments, political negotiations, and legal mechanisms intertwine to shape fiscal policy in real time. Observers note that while a decree-law can cover many urgent needs, ultimate parliamentary consent remains a key gatekeeper for longer-term fiscal moves and for ensuring transparency and accountability in public spending. (Fuente: análisis de políticas fiscales y presupuestarias)