The 2015 budget shows that mandatory items such as pensions, debt interests, transfers to regional and local authorities, civil servant payroll and EU contributions, amount to more than 95% of total expenditure. Trying to implement discretional policies for fostering growth appears somewhat out of reach.
Furthermore, next year´s budget rests upon the bullish bet that current sluggishness in the main Eurozone economies will be short-lived. Should low growth become entrenched, it will eventually hit Spain, pinning down its current recovery. If so, income will fall short of expectations while expenses linked to economic performance-such as unemployment benefits- would sharply increase.
Even allowing for planned growth to meet its target, regional and local fiscal discipline will prove difficult to implement in an election year. Overruns are likely to emerge, driving public deficit beyond its 4.2% target. An overstretched budget would be unable to meet such demanding challenges.
One has the impression that the Government is betting on current demands tabled by France for delaying budgetary adjustment, so allowing others to follow suit. As long as its deficit stands at less than 5%, the Government will feel confident of remaining in safe shores. There is no other plausible explanation for indulging in such overly optimistic assumptions for growth and income figures.