Spain, one of the countries most affected by the crisis in the European Union

Correspondent in Brussels



Spain e Italy They are the two countries most affected by the lack of agreement to set up the recovery fund. Both come from a very delicate situation in terms of debt and need European funds to try to recover their economies, the third and fourth within the EU. In the case of Spain, in addition, the Government has entrusted its entire budget horizon to the arrival of these funds.

Regarding these budgets, the Commission made this Wednesday the evaluation of the draft budgets that the Government of Pedro Sanchez And although it has been “approved” like all of them because the situation created by the pandemic has forced the deficit targets to be suspended, the community executive warns that there are still macroeconomic imbalances in Spain due to its excessive level of public debt and unemployment rate as well as the difference between your investment abroad and the one we receive from other countries.

“Spain entered the COVID-19 crisis with vulnerabilities linked to the external private sector, public debt and high unemployment. With the crisis, the debt and unemployment ratios have increased ”, says the report. “The imbalances have been reducing in recent years in light of favorable economic conditions, but the pandemic has stopped this process and we see new risks emerging,” said the EC’s economic vice president, Valdis Dombrovskis, at a press conference where he repeatedly insisted on the need to consider “medium-term sustainability” of any budgetary measure.

Spain has entrusted its entire budget horizon to the arrival of the recovery funds

For now, decisions such as the increase in pensions or the salary of civil servants are not considered threatening due to the analysis of the Commission’s technicians, who have only seen the sketch that the Government has sent and that it is not clear that it coincides with what that it is finally approved in Congress, in view of the internal debate. A priori, the technicians do not see bad measures that can encourage consumption and activity, but they also criticize the lack of detail in the documentation that has been sent to them.

However, the budget has already been designed with the arrival of these European funds, which are still in the air at the moment. The Commission had planned to offer advances to the most damaged countries, using its own budget to do so, which is another turn of the screw to leave all European finances in a dangerous accounting maze.

In Italy, which are always more creative in this type of situation, the idea has already begun to be considered that it could be decided that all expenses related to the pandemic could simply be canceled and erased so that this debt would not exist. But there is very little chance that you will convince anyone.

Soaring public debt

In the case of Spain, yesterday’s Commission report recalls that the already high rate of public debt, which currently stands at 95.5% of GDP (an outrage if one takes into account that the euro rules indicate that must exceed the 60% threshold) will only increase this year by 25%, thus reaching over 120%, which is, incidentally, the level of debt in Italy at the beginning of the crisis. If Spain has to finance this new debt in the market, even with the favorable conditions created by the European Central Bank, it would greatly increase its financial costs and the country would be left at the mercy of a swivel from the rating agencies and a sharp rise interest.

That is the great advantage of the European reconstruction fund, which is mostly debt too (except for the subsidies part) but it will be issued by the European Commission, which has an unbeatable credit rating, that is, it gets the money much more. cheap, and a part of that debt is not marked as such in the eyes of the Commission’s statistics. In the draft budget, 27 billion euros from these credits have already been included, although it is not known if they will be able to arrive before next summer, in the best of cases, if the political blockade maintained by the Hungarian governments is maintained. and Poland.

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