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Government approves 4.4% increase in expenditure ceiling for 2019

The government slightly lowers the growth forecast for 2020 and 2021. and approves the new deficit targets for public administrations

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Government approves 4.4% increase in expenditure ceiling for 2019

The Council of Ministers approved this Friday expenditure ceiling for 2019, process with which begins elaboration of general budgets of State of next year. The state's non-financial spending limit raises 4.4% to 125,064,000,000 euros, some 5.23 billion more than current stop. This figure sets budget limits for ministries for next year.

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The Minister of Finance, María Jesús, Montero, has presented new timetable for reducing deficit. The government raises deficit target in middle of GDP from next year, which allows to postpone an adjustment of about 6,000 milllones euros in middle of election year

Montero has advanced 4.4% spending ceiling increase for next year. For its calculation executive has taken into account additional revenues contributed by economic cycle and those that report tax increases announced by executive, which amount to about 5 billion.

We may have claimed an increase in spending of higher ministries, up to 15 billion.. Approved by previous PP government for 2018 amounted to 119,834,000,000 euros, 1% more than previous year and was first increase after three years followed by setbacks.

New deficit-lowering calendar

The deficit and public debt targets for period 2019-2021 have been approved by spending ceiling. The executive has already advanced that will review path of fiscal consolidation for next few years. The new timetable for deficit reduction sets a target of 1.8% of GDP for 2019, five-tenths more than agreed with Brussels so far. For 2020, new target rises to 1.1% versus 0.5% committed so far. And in 2021, red numbers to be allowed by Government will amount to 0.4% of GDP. The previous executive had scheduled a surplus of 0.1%. The new path will allow government to postpone an adjustment of 6 billion this year and make a more gradual effort during following exercises.

Along with Minister of Finance has also appeared head of economy, Nadia Calviño, who has reported on updating of macroeconomic table, economic assumptions on which public accounts are built. The Council of Ministers maintains practically intact economic prospects. The calculations place GDP growth at 2.7% this year and 2.4% next. But it lowers growth rate of 2020 a tenth, falling from 2.3% to 2.2%. In 2021 estimates that GDP will grow 2.1%, two tenths less compared to last macroeconomic table.

Less unemployment in 2021

The government estimates decline in unemployment rate to 13.4% at close of 2019, compared to 13.8% of average estimated in last macroeconomic table approved by Government of PP, while for 2020 rate would be located at 12% and would fall to 10.7% in 2021. The Council of Ministers today approved agreement which includes non-financial spending limit for 2019 budget and new fiscal consolidation path for period 2019-2021. According to new macroeconomic table, government estimates that number of occupations amounts to 19,880,000 people in 2019 and exceeds 20,280,000 in 2020, while calculating that number of unemployed is above 3 million for next Year and 2.7 million for next.

Problems in process

The Government should exercise its negotiating attitude to adopt new objectives of budgetary stability. Although spending ceiling is not voted, Congress and Senate must validate deficit and public debt targets and ir distribution among different public administrations. The first ballot will take place on July 24th in Congress and will be passed to Senate, where it is voted, predictably, a week later.

The government can be found with several obstacles during parliamentary process. First of all, you will have to get support of most of Congress. We can oppose lower house by seeing that government ignores its request to raise spending ceiling furr and furr soften deficit-reduction schedule.

In Senate, he expects a PP that controls camera and will not let one pass after motion of censure. In addition, PP-ruled communities voted on Thursday against new deficit targets that allowed m to spend more. This stance provides a clue to attitude of PP in parliamentary process.

Blockade in Senate

Government sources say that if y fail to get ahead of new deficit targets y will draw up budgets with current objectives.  So possible rejection of accounts will not prevent government of Pedro Sánchez from present before 30 September draft general budgets of state for 2019.

"There is no possibility of plan B if Senate does not give approval to this new path. It would be an incredible thing that Kingdom of Spain itself Autoimponga a more demanding deficit target than what Brussels allows. Unless it is an ideological issue it makes no sense that parties do not allow m to travel on a path that will allow citizens more wellbeing, "Montero explained.

However, parliamentary rejection of new budgetary objectives would be viewed with suspicion from European Commission, as it would force more acute adjustments next year, when regional, municipal and European elections coincide. The executive would be exposed for his political weakness by having only 84 deputies from 350 seats in chamber.

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