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Brussels urges Spain to begin the withdrawal of aid due to the energy crisis to limit spending


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Brussels urges Spain to begin the withdrawal of aid due to the energy crisis to limit spending


The European Commission has recommended this Wednesday to Spain the gradual suppression of energy support measures by the end of 2023 and their total elimination in 2024, while encouraging the use of the corresponding savings to reduce the public deficit and limit spending .

In addition, it points out that in the event that new price increases make more support measures necessary, these must be fiscally affordable and are intended solely to protect the most vulnerable households and companies.

In relation to the return of the common fiscal rules - frozen since 2019 due to the pandemic - which set a maximum public deficit of 3% of GDP and a debt of 60%, Brussels has urged the Spanish Government to guarantee a fiscal policy "prudent" and, in particular, to limit the nominal increase in net primary spending financed at the national level -the new indicator proposed by the Commission- in 2024 to a maximum of 2.6% compared to the previous year, which implies a structural adjustment of at least 0.7% of GDP in 2024.

Assuming no policy changes, the Commission's 2023 Spring Forecast projects that domestically financed net primary spending will grow by 1.4% in 2024, below the recommended growth rate.

Brussels also encourages Spain to preserve public investment financed at the national level and guarantee the effective absorption of subsidies from the Recovery and Resilience fund and other aid from the EU, in particular to promote the ecological and digital transitions.

For the period after 2024, the Community Executive requests that a medium-term fiscal strategy of "gradual and sustainable" consolidation be continued, combined with investments and reforms that promote greater growth, in order to achieve a "prudent" budgetary situation. in the medium term until 2026.

According to the programme, the general government deficit is expected to decrease gradually to 2.7% of GDP in 2025 and to 2.5% in 2026. Therefore, the Spanish government deficit is expected to decrease by below 3% of GDP in 2025 and that the public debt ratio drops from 109.1% of GDP at the end of 2024 to 106.8% at the end of 2026.

Likewise, Spain is expected to maintain momentum in the constant application of its recovery and resistance plan and quickly finalize the chapter on energy measures with a view to starting their application "quickly", in addition to guaranteeing the continuity of "sufficient" administrative capacity. with a view to the planned increase in the size of the plan, after Spain declared on March 28 its intention to request an additional 84 million euro loan.

Other of the recommendations raised by Brussels include reducing dependence on fossil fuels, accelerating the deployment of renewable energies, increasing the availability of energy-efficient social and affordable housing or intensifying political efforts aimed at the provision and acquisition of the necessary qualifications. for the ecological transition.

In its report after the economic imbalance procedure (PDE), Brussels highlights that the Spanish economy overcame the disturbances caused by Russia's war of aggression against Ukraine and registered "strong growth" in 2022 that is expected to continue throughout 2023, with a growth forecast of 1.9%, in line with the Commission's projections, although at a "more moderate" rate.

The Community Executive has also highlighted that the balance of the Spanish public administrations in 2022 has improved, favored by the good behavior of revenues, although it warns that the underlying deficit and public debt continue to be "elevated".

On the other hand, it underlines that the banking sector has remained resilient, as asset quality has continued to improve and profitability increased notably in 2021 and 2022, but it faces new challenges stemming from high inflation and tightening financing conditions.