Spain politically unable to meet the Commission’s fiscal consolidation demands

OLIVIER HOSLET

Spanish Prime Minister Mariano Rajoy arrives at the start of the second day of the European Council meeting in Brussels, Belgium, 29 June 2016.

Spain politically unable to meet the Commission’s fiscal consolidation demands


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Brussels is asking for budget cuts no Spanish government could deliver or can deliver. For more than a year neither Rajoy’s 10-month interim administration nor his 15-day-in-office minority government can deliver cuts.

Brussels is demanding €5,5bn cuts, to bring the Spanish economy in line with the 3,8% deficit target in 2017 from the current -4,6. The fundamental projections for the Spanish economy published on Wednesday project better than expected growth this year – hence smaller deficit – but worse than projected growth for 2017.

Given an expected GDP growth slowdown from 3,2% to 2,3%, Madrid must affect cuts.

The Popular Party (PP) minority government was hoping not to introduce a budget that entails further cuts while leading a minority government that depends on Social Party (PSOE) votes. The Economy Minister Luis De Guindos and Finance Minister Cristóbal Montoro have already made statements to that effect, El Pais reports.

If Brussels insists, the support for the incumbent government will be tested. The Socialists have already made clear they are no voting for cuts.

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