The Government is committed to presenting Budgets without deficit limits

The next General Budgets risk facing parliamentary processing without some crucial data being sufficiently specified in its articles: the deficit and debt ceilings to which the different Administrations must submit next year. That is the high toll that the newly formed Government is willing to pay to lessen the effects of the veto that the Senate (controlled by the PP) will most certainly impose on the new Accounts.

Is about a very high price, due to the legal complications that this budget gap would cause in Spain. Furthermore, according to the experts consulted, this lack of definition will not sit well in Brussels, which has just begun the year in which, in theory, the validity of the fiscal rules should be restored.

But everything indicates that Moncloa has no other option if it wants to meet the deadlines it has imposed on itself to approve the 2024 Budgets. Since last weekend, the Executive has been working to clarify the real scope of the senatorial veto on future Accounts. These are based on three provisions that will be approved by the Council of Ministers: the State spending ceiling, the spending rule for all Administrations and the distribution of debt and deficit objectives for each of the levels of the public sector ( State, autonomies, Social Security, local corporations).

They are all interrelated aspects but only the last one is submitted to a parliamentary vote and, It is therefore susceptible to a veto in the Senate, without Congress being able to lift it.. From the Government, they argue that “it would not be the first time” that, after defining a ceiling and a spending rule, the Executive renounces establishing “binding objectives” of deficit and debt for the Administrations and, even so, embarks on the parliamentary processing of Budgets.

Pedro Sánchez’s team can attest to this since that is exactly what they did in 2019, when has already encountered the budget veto of a Senate in the hands of the popular. Now, the parallel with the current situation is inaccurate. In 2019, no new debt and deficit ceilings were approved, but it was possible to resort to those already validated in 2018, defined for an economic situation that, in general terms, remained the same a year later.

An already unviable resource

Such a last-minute resource is not available in 2024. In recent years, no objectives of this type were approved due to the emergency posed by Covid. If the Government now wanted to stick to this path, it would have no choice but to go back to 2019-2020, and resurrect numbers that are completely out of date with respect to the current situation.

To get out of the impasse, and given the impossibility of the Senate withdrawing its veto, the ideal situation for the Government would be to reform the Budget Stability Law so that it deprives the Upper House of that power, as he already tried in the recent past. The slowness of said process, however, would completely disrupt the deadlines that Moncloa has set for processing his Accounts.

Given this reality, “it is very possible” according to the sources consulted that the Government has no choice but to give up defining the new debt and deficit limits and, even so, dare to start the process. This would begin a journey marked by complete legal uncertainty.

Already at the beginning, the Congress Board would be in a position to reject a bill that is presented with such a marked deficiency. It would be possible, however, overcome this obstacle due to the majority that PSOE and Sumar enjoy in that parliamentary body.

Subsequently, the Senate would not have to remain idly after seeing the way in which its veto of the Administration’s fiscal path is attempted to be circumvented. I would be like this in a position to file a contentious-administrative appeal before the Supreme Court.

A sketch already in Brussels

And outside our borders a problem of comparable magnitude would arise, at least in terms of credibility before institutions and before markets. It is true that the Spanish Government has already sent Brussels a draft budget for 2024 (Draft Budgetary Plan, according to the community nomenclature), which already establishes a target for reducing the public deficit.

That roadmap, however, will lose all credibility in the eyes of the community authorities if it is not ratified by General Budgets that bind the Administrations.