The Government has assumed that it no longer has material time to be able to present the new project before the end of the year. Consequently, the Ministry of Finance will have no choice but to extend the 2023 budget again during the first months of next year and bring its budget proposal for 2025 to Congress starting in January in order to guide the remainder of the legislature. In the best scenario there would be a delay of three months with respect to what the Constitution establishes, although everything indicates that it will be even greater. The obstacles that the Government is encountering, together with the delay it has suffered due to the difficulty in securing support, explain this delay in the calendar. The parliamentary weakness of the Executive is making the processing of many regulations difficult and threatens to complicate the budget law. For this reason, the Minister of Finance, María Jesús Montero, is working to obtain maximum political support from the investiture parties before presenting the project.
Initially, the Executive was exploring the possibility of taking it to the Cortes before the end of the current year and momentarily extending the 2023 accounts while waiting to receive the final green light. In fact, officially, the Treasury has not yet ruled out this possibility and affirms that the ministry’s objective is to present the plan “as soon as possible.” Other government sources, however, admit that there is no time left and that there is no choice but to wait until next year to start the entire process. This is also confirmed by two consulted State auditors and auditors. “It is impossible to give time,” they emphasize.
The approval of budgets requires different stages, and in all of them the Government will have to do a double-take to try to obtain the necessary support from parliamentary partners, which will further delay the process. The Budget Stability and Financial Sustainability Law details that the first step is the approval of the stability objectives (deficit and public debt limits) for the different administrations and the non-financial spending limit, commonly known as the spending ceiling. These are the essential figures on which the pillars of the accounts rest and represent the starting signal for any process of this type, which at this point in the year should already be settled.
From here, once the path and the spending ceiling have received the endorsement, the Council of Ministers must approve its public accounts project and submit it to the Cortes Generales at least three months before the expiration of the year’s accounts. above, as established by the Constitution. This entire succession of steps is clearly delayed and the Executive assumes that what should have been approved on September 30 at the latest will see the light of day, in the best of cases, starting in January, more than three months later.
The big problem for the Government has been the path of obstacles that it has encountered to date in the process of the fiscal path, and that for now it has not been able to solve. It all started in December of last year, also several months late due to the July 23 elections and the difficulties in forming a Government. At that time, the Treasury tried to launch the budget liturgy of the 2024 accounts: it raised the spending ceiling to a new record and communicated the deficit targets to communities and local corporations. This plan passed through Congress, but was later defeated in the Senate thanks to the majority held there by the Popular Party, so the process remained at a standstill. Weeks later, with the budgets extended, the Government renounced the 2024 accounts and, in order to save the 2025 accounts, – approved in June – an amendment that eliminated the Senate’s veto capacity and that would allow the proposed path to enter in force with the simple majority of Congress, a priori guaranteed by the partners of the investiture. The budget extension of a complete year is an anomaly in democratic history — it also happened in 2020, during a pandemic. During Mariano Rajoy’s mandate, there were several extensions because the PP took several months to present and process the project, but in the end it managed to carry out the economic guide every year.
However, when it seemed that everything was on track and that the new fiscal path could be carried out, the Treasury suffered another major setback. The fight between the PSOE and Junts had been gaining strength after the results of the Catalan elections in May and, in July, Carles Puigdemont’s party blocked – along with PP and Vox – the deficit objectives, this time in the lower house. Thus, the Government found itself with a new rejection of the stability objectives in Congress and was forced to negotiate with Junts for its support, something that is still up in the air.
It establishes that the red numbers of the public sector as a whole cannot exceed 2.5% of GDP in 2025 to meet the Brussels objectives. The distribution establishes a gap of 2.2% for the State, one of 0.2% for Social Security, another of 0.1% for the autonomous communities and a budget balance (or zero deficit) for local entities. The problem is that Junts demands more fiscal margin for the autonomies, which the Central Administration should foreseeably lose. The Treasury is negotiating this matter with the Catalan party to try to unblock the path as soon as possible. Initially, Junts had demanded a deficit for the territories of 0.8% of GDP compared to the 0.1% proposed by the ministry. According to knowledgeable sources, the two parties would be willing to make their position more flexible, so they could reach an intermediate consensus in the coming days.
However, once this is achieved, the Treasury will have to agree with the rest of the investiture partners on the composition and design of the public accounts, something that, the Government recognizes, will also delay the process. As an example, there is the hard and agonizing negotiation that took place in recent weeks, which culminated in an agreement on minimums that was reached over the horn last week. Although the first vice president and Minister of Finance, María Jesús Montero, stated a few days ago that this negotiation was more difficult than the budgetary one, Executive sources once again anticipate a dog-eat-dog discussion with the investiture partners to be able to approve the budget project.
