The Editorial Board of elEconomista calls for a fiscal plan that places the deficit at 3%

The electoral advance applied by the President of the Government, Pedro Sánchez, opens the door to the analysis of the risks and needs that, the Executive that comes out of the elections on July 23, will have to be alleviated to correct the current problems. From the editorial board of the Economista group of top-level economic experts, ask the next government for a credible fiscal consolidation plan that will place the deficit at 3%, a sine qua non condition for complying with the European Union’s Stability and Growth Pact.

For the economist Salvador Marín it is necessary to face a set of “agreed” reforms in taxation. “We need an ambitious and definitive tax reform, in keeping with the 21st century and new jobs and the economic future. In other words, a new simplified model based on few taxes, with lower average rates and simple in its application and management, is the basis of the path to follow with the ultimate goal of widening tax bases and improving the quality of public spending”.

Javier Santacruz (economist) speaks along these same lines, who sees it essential to “redo” fiscal policy, eliminating “the new taxes created in recent years”, as well as adapting others to inflation and rationalizing “all aid policies, subsidies and transfers that have caused an increase in spending greater than the growth in income”.

For his part, Fernando Acedo-Rico (property and commercial registrar) believes that the first measure to be taken by the new government team should be to lower personal income tax, equating it to Corporate Tax. “It cannot be understood that the income of individuals is penalized so much compared to IS, which taxes millions of companies with great economic capacity,” he explains.

The fiscal and economic policy applied during this legislature “has left a worrying situation,” says Miguel A. Bernal. The lack of a clear strategy on these issues is something that cannot be solved with “short-term measures without any framework for the long term and without agreements between the two main national parties.”

The measures taken so far by the Government in this regard “lead to a higher collection to cover the increase in unnecessary expenses and that do not go to the root of the big problems,” completes Bernal.

The fundamental reason why the economic indices place Spain better than most forecasts is due to the fact that “we have not yet paid the cost of the crisis”, explains the inspector of the Treasury, Francisco de la Torre, and that he sees “with clarity on the fiscal aspect” with a public debt that reaches 113% of GDP. “But, above all, we will have to pay more interest on that debt, as the titles are renewed, due to the inevitable anti-inflationary policy, of rising interest rates, of the European Central Bank,” he added.

European funds

Another of the great challenges that the next Executive will face is the management and distribution of European funds. From the productive fabric they have been demanding for a long time that this money be allocated to companies to boost the national economy. For Almudena Semur, general secretary of the Urban Services Observatory (OSUR) and economist, the current strategy must be “totally” modified, creating a “committee of experts in each economic sector.” In the same way, she calls for clarifying and simplifying the cumbersome and crazy current management of funds, creating a simple and easy-to-apply mechanism for project development.

De la Torre goes a step further and conditions a future improvement in the productivity of the Spanish economy, an “essential condition to increase economic growth”, to digitization and investment of European funds. “They would be the two great instruments, that well used”, should allow the next Government. “to modernize the productive system, and free it from administrative and regulatory obstacles”.

Regarding the execution of the funds, Javier Santacruz, sees a risk “less than a year” from the final delivery of the projects that must be executed before 2026, “the 84,000 million in reimbursable funds will be requested shortly.”

The professor of Economics at CEU San Pablo, Javier Morillas, points out that our role in managing the funds can increase “distrust and loss of reputation in Spain” as a result of not having used the endowment.

Pension viability

The reform of the pension system undertaken in this legislature by the Minister of Social Security, José Luis Escrivá, especially the second part of it, which was not supported by employers. These will pay an extra 9,000 million in contributions and endangers the survival of the current system for the generations after the baby boom. The deficit of the current system is expected to rise above 50,000 million by 2050.

For Bernal, “we have a situation that does not result in the issue of the viability of future pensions. The labor market presents great deficiencies that place our country in the worst position among the countries of our environment in terms of unemployment and precariousness, something This is further aggravated in certain groups. Jobs are also highly concentrated in low-value-added production sectors, with the industrial sector losing weight”.

Salvador Marín also warns of the need to undertake a new reform of pensions and public administration and face measures that “seek to encourage facing high youth unemployment.” For example, “it could be proposed to use the funds to reform the pension system by adjusting a new solidarity index, strengthening pension plans, capitalization systems, or introducing the so-called ‘Austrian backpack'”, which would only have virtuality long term; that is, “start with your application from people with a certain current age, and for the rest continue with the previous model”.

In addition, Marín points out, the aging of the population “has negative consequences on the sustainability of the public pension system and on economic growth in the medium and long term. The pension deficit must be reduced to guarantee sustainability and avoid creating an added burden for future generations.”

Sustainability and energy

Another of the great challenges for the next legislature is the energy transition and environmental sustainability of the country. Bernal points to the need to provide Spain with “a hydrographic model that guarantees water for all”.

Almudena Semur adds that “water and drought have a very important weight in GDP”, which is why it will be necessary “a hydraulic policy that guarantees the availability in quantity and quality of the resource for all uses”, endowing the budget with the necessary items to undertake the necessary infrastructures.

Javier Morillas, for his part, calls for a Water Plan, “that promotes the agricultural sector itself.”

For Salvador Marín, the next legislature must face, in a reasoned way, that climate change and the preservation of biodiversity are new values ​​that recompose the compass of Spanish citizens, which will give rise to an enormous opportunity for economic development. “Adequate incentives, a public investment plan and a competitive environmental tax policy under the principle of whoever pollutes pays and whoever preserves copper (less taxes or incentives),” proposes Marín.

The new government will have to face great risks in the field of energy transition. “The attraction of investments to carry out the necessary decarbonization and electrification far from the initial plans of the Government with which it intended to nationalize the electricity sector in practice,” analyzes Javier Santacruz.

regional financing

After the 28M elections, the opportunity arose to address the reform of the regional financing system, key to ensuring the sustainability of basic public services in the future. The current system, expired since 2014, must be reformed to adapt budget allocations based on the reality of the autonomous communities.

Salvador Marín calls for the next Executive to agree on this new system, “with a commitment to co-governance and stability over time” to avoid “regional tensions” because of this. Javier Santacruz emphasizes that the system has “expired since 2014”, causing a deterioration in public services, “despite the fact that the Public Administrations are generating historical maximum collections”.

business ecosystem

The government’s relationship with businessmen has ended the legislature with problems. The Government reformed pensions and raised the minimum wage without the consensus with CEOE, and part of the Executive has dedicated itself to attacking them without consequences. As if that were not enough, “both fiscally, as well as in legal security and in other aspects, we have to be able to create a friendly environment for businessmen, develop new projects and attract foreign investment. All of this is aimed at achieving long-term a modernization of our economy, where Spain is a benchmark in new sectors and needs that are practically already present or very close. Digitization, technology, a new energy model, changes due to the aging of the population are fundamental challenges,” says Miguel A. Bernal.