Bankinter | The ECB has called attention to the evolution of Spain’s fiscal deficit in its Annual Report for 2018, published this week. In one of its chapters it includes comments on the lesser degree of compliance with the Growth and Stability Pact observed among more vulnerable countries:
“… it is worrying that the lower degree of compliance with the Growth and Stability Pact is observed in those countries more vulnerable to instability. In fact, the projections of the European Commission suggest that, in 2018, the majority of countries which have still not achieved healthy budgetary situations have not complied with the commitments acquired in the framework of the Growth and Stability Pact. Of seven Eurozone countries which, according to the Commission, run the risk of being diverted from the demands of the preventive component of the Growth and Stability Pact, four – Belgium France, Italy and Portugal- have a debt ratio above 100% of GDP.
“In addition, although Spain, the only country subjected to the excess deficit procedure in 2018, fulfills the correction period established within the excess deficit procedure, this achievement conceals an excessive and growing public deficit, can graft to the recommended.
The impact on Spain’s risk premium, currently around 120 b.p. (IRR 1.12%/1.14%), will probably be negative.