Experts in tax issues are busy these days trying to explain what has happened with corporate tax, the revenues from which have fallen no less than 85% in the January-July period. The Tax Office only raised 433 million euros compared with 3.011 billion in the first six months of 2015.
The PP and Ciudadanos reached an agreement to incorporate a “guaranteed wage supplement” in the package of measures which allowed Albert Rivera’s party to support Rajoy’s bid for a second term in office. (This measure would mean an increase in spending of more than 7.5 bilion euros over the next legislature). Meanwhile, Pablo Iglesias continues to fight for a rise in the minimum wage to 950 euros a month in 2020 – currently it stands at 655,20 euros.
Caretaker Prime Minister Mariano Rajoy is stubbornly holding on to his target-promise that Spain can create 20 million jobs by 2020 if the current economic policy is maintained. But the reality of the Spanish economy is just as obstinately demonstrating that there are very considerable holes.
Spain’s socialist party PSOE doesn’t seem to be too worried about the fact the country may not have a 2017 Budget. But it’s increasingly clear to all of us that the lack of a budget will not be without a cost. On the contrary, it will greatly affect a large part of Spanish society. Almost all economists believe that the impossibility of drawing up new accounts, and updating certain items, could mean that the amount spent on civil servants’ salaries will be maintained.
As we have already said there are moments when the economic and political cycles don’t go hand in hand. Yesterday, the investiture of caretaker Prime Minister Mariano Rajoy got underway, with very slight possibilities of his being able to win enough votes to return to office with a majority. But the Ibex 35 blue chip index didn’t even move: in fact it posted a nearly 1% gain.
The Spanish right and centre parties have brokered an agreement for breaking the current political deadlock. The caretaker Cabinet has held office for nine agonizing months as two general elections failed to produce an outright winner. Even if the settlement reached between the caretaker Popular Party government and Ciudadanos marks a sizeable step forward, it will still fail to deliver enough parliamentary support for securing a stable government. The Socialist Party continue to firmly hold the key to power.
Spain’s caretaker Prime Minister Mariano Rajoy will this afternoon make his investiture speech to parliament, ahead of a key vote on Wednesday to secure support for his conservative Popular Party to form a new government. The PP have already brokered an agreement for breaking the current political deadlock with centre-right party Ciudadanos, led by Catalonian lawyer Alber Rivera. As a result, Rajoy can probably rely on the support of 170 MPs. But he needs 176 votes (out of a total of 350) if the PP is to win an absolute majority.
Judging by the incessant comments these days from all kinds of financial experts and even independent voices, one of the best solutions for Spaniards in the face of the country’s serious pension system crisis is to sign up to a private pension plan. In reality, no-one has any doubt that the public pensions system will not be able to meet its commitment to providing a decent pension for future retirees, in line with their expectations. That said, are private pension plans the solution?
BBVA Research | For 2017, the economic cycle is expected to continue correcting the deterioration in Spain’s public accounts, but in a scenario without changes in fiscal policy, the shortfall would decline only to 3.6% of GDP, and would exceed the budgetary target set at 3.1%. Further adjustments will be required to ensure a durable correction.
Mari Pinardo | Do you remember the summer of 2012, when Spain’s risk premium reached a record high of no less than 638 basis points? Four summers later, this spread seems like it belongs to a completely different country. Since that fateful summer, Spain’s sovereign risk has declined nearly 550 bp and just last week broke the 100 bp threshold. There are basically three reasons which have pushed the risk premium through the 100 bp threshold: a date for Spain’s caretaker Prime Minister Mariano Rajoy’s investiture, the economic policies which have been in place in the Eurozone since April 2015 and the fact that it looks less likely the Fed will raise interest rates in September.