Spain is better off without a new budget

Spain's government

Many argue that Spain lacks a proper government, with the one in office proving unable to secure parliamentary backing for the 2018 general budget. Undoubtedly, running a rollover budget prevents the implementation of updated policies. Yet the price to pay for settling this issue seems too high. Ensuring majority support for the new accounts involves footing a disproportionate bill, as potential political partners press for top-heavy expenditure. Not to mention the constant pressure from regional authorities eager to substantially increase their funding.

Spain is faced with the urgent need to curb its deficit at below 3% to escape the current EU profligate statute. If not, it risks running into severe difficulties. Breaking the commitment with Brussels ranks as a low-grade concern. But disappointing the markets could fuel a merciless backlash, especially if Italy opts for an unreliable government in the upcoming elections. There is much at stake indulging in a loose budgetary stance right now.

The government in Spain should stick to sound finances as its paramount goal. Securing a budget always provides comfortable room for manoeuvre. But sacrificing the expenditure ceiling to reach that objective might prove fatal. Contrary to Bertrand Russell’s motto on nuclear war perspectives, it seems better to lay dead rather than turning red with regard to the public balance sheet.

Even if Italy surprises the world with sensible polls results, the looming rate hikes coming from the US will sooner or later take a massive toll on such an indebted country as Spain. A good reason for keeping a tight budget, disregarding invitations to rubber stamp fancy extra spending for the sake of approving new public accounts.


About the Author

JP Marin Arrese
Juan Pedro Marín Arrese is a Madrid-based economic analyst and observer. He regularly publishes articles in the Spanish leading financial newspaper 'Expansión'.