Independent Financial Responsibility Authority (airef) issued a warning this Wednesday about the budget rebalancing plan through 2026, noting that it does not align with the organic law on Budget Stability and Financial Sustainability approved by the Cabinet on Tuesday. In Airef’s view, the plan fails to include measurable steps to cut the deficit to 2.5% of GDP by the end of the projection period outlined by the government.
The Council of Ministers sent the approved plan to Turkish courts for discussion and approval. On Tuesday, Fourth Vice President and Finance Minister Maria Jesus Montero argued that the rebalancing plan would reduce the deficit to 3% of GDP in 2024, down from 3.9% in 2023, and that this improvement would come without harming welfare. She attributed the improvement to stronger growth, job creation, and support from European funds. Montero claimed this is the first time a rebalancing plan has been approved in the country without relying on neoliberal policies and highlighted the potential for prudent fiscal management.
Airef also accuses the Government of overlooking the fiscal rule reform being finalized at the European Union level. According to Airef, implementing the new framework would require adjusting by about 0.64 percentage points of GDP each year, roughly 8.6 billion euros annually, between 2025 and 2028. Under Airef’s projection the deficit would reach 2% of GDP in 2026 and 0% in 2028, contrasting with the Government’s plan of 2.5% of GDP in 2026. Airef emphasizes that the actual path will depend on the final form of the EU framework and its rules.
target path
Outlining a credible rebalancing plan is essential after a period when the fiscal rule was suspended across Europe, driven by the health crisis and the disruptions from the Ukraine situation. Spain faced a peak deficit of 10.1% of GDP in 2020, making an agreed path toward a stable deficit essential to maintain public confidence and investment. The plan seeks to ensure that the gap between revenue and spending remains within the EU’s Growth and Stability Pact guidance and returns to sustainable levels as soon as possible.
The document mirrors the deficit targets already presented in the Administration’s Stability Plan Update from April and later in the Budget Plan forwarded to Brussels in October. The Government’s documents aim to reduce the deficits of all administrations from 3.9% of GDP in 2023 to 3% in 2024, then to 2.7% in 2025 and 2.5% in 2026.
devastating report
Airef questions the rebalancing plan’s intent, suggesting it merely consolidates previous documents rather than presenting a detailed, legally required breakdown of income and expenditure. The critique centers on whether the plan shows how deficit reduction would meet future European fiscal rules and whether it provides a clear definition and schedule of measures to achieve targets. Airef also notes the absence of explicit assumptions, a formal stability analysis, and a transparent assessment of how the revenue and expenditure projections were derived.
The forthcoming Airef report argues that the plan fails to comply with the stability law and does not clarify whether the 2024 General State Budget draft or the Budget Plan update might alter the estimates. It warns that the proposed path could exceed the medium-term fiscal structural targets set by European reforms. The analysis points to the need for a robust assessment of how future EU-wide rules would affect Spain’s fiscal configuration and budgetary strategy.
Suggestions
Airef recommends a reform-focused approach to budgeting that aligns with the new EU fiscal framework. The authority calls for a medium-term financial strategy that reflects tighter fiscal rules and emphasizes strengthening the resilience of public finances. It also urges the initiation of studies to support a national fiscal framework reform, ensuring that target setting is accompanied by clear actions, measurable milestones, and transparent assumptions. This approach would help guard against fiscal fragility and promote disciplined public financial management, grounded in evidence and cross-border alignment with EU standards.