Spain is far from complying on deficit and State debt targets. It’s still surprising that out of a total amount of debt issued equivalent to 137% of GDP, there can be an official debt of 98%, thanks to a cut which, under the EU’s conditions themselves, is fully approved. This growing divergence has been there for years, particularly since the PP entered government in November 2011.
Many argue that Spain lacks a proper government, with the one in office proving unable to secure parliamentary backing for the 2018 general budget.
After twenty years of similarity between 10-year rates in the US and Germany, for the last six years there has been a growing decoupling of the US rate, reaching a spread of 2%. So what are the macroeconomic differences justifying such behaviour? Germany’s huge savings play a big part.
Athanasios Dimadis and Hung Q. Tran | US is not alone in its worry about debt and deficit. According to the International Institute of Finance statistics, China poses the biggest threat to global economic stability, its total debt having risen astronomically over the last decade. The eurozone is still trying to heal the scars of an enduring economic crisis, with Greece’s unmanageable debt remaining a significant problem.
Donald Trump’s tax plan, which is now being debated in the Senate, states very seriously that its effect will be to multiply investment and jobs. That’s up for discussion, given that the US has probably reached its maximum potential, namely in terms of GDP without inflation and the jobless rate is at 4%.
The European Commission determined on Wednesday that the draft of Spain’s budget for 2018 sent by the Spanish government “complies in general terms” with the criteria established in the Stability and Growth Pact. Despite the fact the public deficit will exceed the target agreed on for next year.
The European Central Bank (ECB)’s non-conventional measures contributed 1,7 percentage points to Spain’s real GDP growth between 2014 and 2016, while also helping to cut the public deficit by 1,9 percentage points over the same period.
Spain’s trade deficit declined 22.4% to 18.754 billion euros in 2016, the second smallest figure since 1997, thanks to record exports.
Up to what point is the lack of a government affecting Spain and its government? Spain’s Stock Market Regulator (the CNMV) now has no visible head. And the number of public sector jobs cannot be increased, nor AENA’s air fares. But perhaps this is due to other reasons which could have equally existed in a normal political situation.
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.