The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, took part today in a conference on the economic situation organised by Funcas, in which she referred to the first Medium-Term Structural-Fiscal Plan 2025-2028 published on October 15th by the Government and evaluated by AIReF on November 5th. In her opinion, the Spanish plan is a document that is likely to be useful for European fiscal supervision. However, it is not sufficient at a national level, nor does it represent the end of the process, given that it needs to be developed and transposed to the Spanish reality.
Specifically, the President pointed to the need to specify the design of the stability targets for each level of the General Government (GG), to specify the projections for each GG authority and the aggregate, to identify on an annual basis the measures that will enable the commitment to the expenditure path net of discretionary revenue measures to be met, to seek a consensus and to adapt the national framework to the new European framework so that they are coherent and consistent.
The President began her speech by recalling that AIReF published its report on the Spanish plan on November 5th, together with the Report on the Main Lines of the General Government Budget for 2025, in which it updated AIReF’s economic and budgetary outlook for the period 2024-2029. AIReF revised growth upwards for 2024 and 2025 and estimated a subsequent slowdown in the medium term (2029). It also estimated a stabilised public deficit of around 3% of GDP until 2029, while the public debt will continue to fall. However, its moderation will be exhausted towards the end of the decade.
In the Report on the Fiscal Plan, AIReF evaluated the plan on the basis of this scenario at constant policies, as the Government only provided a complete macroeconomic scenario for 2025 and 2026 and budgetary projections for 2024. Furthermore, the plan’s 2025-2031 spending path is not broken down by sub-sector, nor are details provided of the measures that will enable it to be met. According to its scenario, AIReF considers that net expenditure growth will be sustained at around 3.5%, a higher rate than in the Spanish plan, and will lead to a more negative deficit path than forecast by the Government as from 2026. According to AIReF, to achieve the deficit forecast in the plan of 0.8% of GDP in 2031, primary expenditure net of measures would have to grow at an average rate of 2.8%.
Against this backdrop, the President considered whether the first fiscal plans have achieved the aims of the reform designed to strengthen national ownership, avoid pro-cyclical policies and reduce the complexity of the previous fiscal framework. In the case of Spain, national ownership has been insufficient both in terms of the design of the plan and in the lack of debate in Parliament and dialogue with the main stakeholders, in particular the Autonomous Regions (ARs). As regards the fiscal policy stance, the plan leaves the largest adjustments for the final part of the period. The simplification and greater transparency of fiscal monitoring has progressed through the use of a single, observable control variable, but this is still insufficient in view of the complex technical issues that remain to be clarified and are subject to potential interpretation. Neither has AIReF been involved beyond the endorsement of the macroeconomic scenario.
The first plans, a political commitment
Accordingly, Cristina Herrero considered that the first plans are more of a political commitment than a genuine medium-term national fiscal strategy, partly due to the European fiscal framework itself, which is not very demanding in terms of content and institutional anchoring. Furthermore, common methodologies have been used instead of harnessing the potential offered by Independent Fiscal Institutions (IFIs) such as AIReF to design paths that are more closely tailored to the reality of each country. Some uncertainties have been left up in the air, such as the treatment to be given in 2024 and the functioning of the control account.
As in other countries, the Government has limited itself to adhering to the minimum required, missing the opportunity to draw up a complete and consensual strategy. That is why, in its report, AIReF recommended that the Ministry of Finance should take advantage of the transposition of the National Fiscal Frameworks Directive to design a credible and effective medium-term budgetary framework, ensuring the coherence, consistency and effectiveness of the national fiscal framework. According to the President, the definition of a strategy would be easier if an effective and credible medium-term framework, as required by the Directive, was in place.
