EC validates Spain’s Fiscal and Structural Plan and supports reforms and investments roadmap

Julio García The European Commission has validated the medium-term Fiscal and Structural Plan submitted by the Government on October 15, in compliance with the new economic and fiscal governance framework of the European Union, in whose definition and negotiation Spain played a leading role during the Spanish Presidency of the EU Council. “Spain will lead growth among the major European economies, and it will do so in a balanced way, protecting the welfare state and the necessary future investments, in a way compatible with our commitment to fiscal responsibility,” stressed the Minister of Economy, Trade and Business, Carlos Cuerpo. According to the Spanish Government, the Spanish Plan endorsed by Brussels is for four years and presents a consolidation scenario for seven years by including additional measures. These accounts guarantee the sustainability of public debt in the medium term, thus complying with the new European fiscal supervision framework and maintaining the Government's commitment to fiscal responsibility. In order to meet the objectives, the Commission has supported the average growth path for net primary expenditure established by Spain of 3.4% for the period in force of the Plan (2025-2028) and 3% for the 7-year period. This path will allow the debt-GDP ratio to be below 100% in 2027 and the public deficit to be continuously reduced to 0.8% in 2031. "In this way, the Commission has once again placed Spain in the group of good students, that is, of the Member States that comply with the new European fiscal rules, thus supporting the roadmap and investments and reforms that underpin our balanced, sustainable and fair growth model," said Minister Cuerpo. In a press release, the Executive highlights that Spain leads growth among the major European economies and does so in a balanced way, compatible with Spain's commitment to fiscal responsibility. The Commission's messages in its assessment indicate that Spain will grow by 3% in 2024, almost four times more than the euro zone, supported by a robust labour market, dynamic consumption and a resilient foreign sector. The reforms and investments presented in the Spanish Plan also allow for the continuity of an ambitious modernisation agenda in some strategic areas, such as the double green and digital transition, energy security, promotion of professional skills, improvement of the business climate or the promotion of affordable housing. With all this, Spain's growth potential is increased and the sustainability of its public finances is reinforced. "We will be able to protect the welfare state in the future and our necessary investments in strategic matters, and at the same time we will continue to reduce the weight of debt and the public deficit on our GDP," added Minister Cuerpo. Fiscal Plan The Fiscal and Structural Plan endorsed today by the European Commission includes a set of measures with macroeconomic and fiscal effects in the medium and long term. The catalogue contains reforms and investments approved in the Recovery, Transformation and Resilience Plan, the deployment of which will increase potential GDP throughout the adjustment period. These include the recent tax reform approved by the Congress of Deputies on 21 November, which establishes the entry into force of tax reforms aimed at increasing public revenues and modernising the tax system. The Plan also includes new commitments in terms of economic policy to address the new challenges and challenges of the Spanish economy. The measures have been grouped into five main areas: ecological transition, digital transformation, human capital, physical capital and productivity, and budgetary measures. Among the measures in the field of Ecological Transition, the most ambitious new objectives of the Integrated National Energy and Climate Plan stand out, with measures related to energy storage, the deployment of renewables, the promotion of self-consumption and energy efficiency. Likewise, with the aim of speeding up electrification and the deployment of networks and electricity supply points, the approval of a Strategy for the planning of the 2025-2030 transport network is included as a new measure. In the field of Digital Transformation, the measures contained in the National Digital Skills Plan and the reform of the science and R&D system, as well as the Artificial Intelligence Strategy, stand out. The axis of promoting Human Capital includes all the economic policy measures aimed at expanding the quantity and quality of the job offer in Spain. In this area, those related to the labour market stand out, such as the labour or subsidy reform, the reform of the immigration system and the simplification of the qualification homologation system. As regards the promotion of physical capital and productivity, measures are included to expand the stock of capital installed in Spain, as well as to improve Total Factor Productivity. In this area, measures aimed at improving the business climate, reducing bureaucratic barriers for companies and those aimed at expanding the housing stock stand out. Finally, in the budgetary area, actions are included that have an impact on fiscal sustainability by reducing expenditure beyond compliance with the spending rule and improving the efficiency of public spending. The validation of the medium-term national fiscal-structural plans that the Member States presented to the Commission constitutes the core of the new economic governance framework and its approval represents the first milestone achieved in this scenario. The plans must meet two objectives: to ensure that, at the end of the adjustment period, the debt of the Public Administrations follows a plausibly downward path, or remains at prudent levels, and that the public deficit is situated and remains below the reference value of 3% of GDP in the medium term; and secondly, to ensure the implementation of reforms and investments that respond to the main challenges identified in the context of the European Semester and address the common EU priorities. In addition, the Plan should explain how the Member State will ensure the implementation of reforms and investments that respond to the main challenges identified in the context of the European Semester, in particular in the country-specific recommendations (including those relating to the macroeconomic imbalances procedure, if applicable), and how the Member State will address the common Union priorities. The budgetary adjustment period covers a period of four years, which can be extended up to three years if the Member State commits to carrying out a set of relevant reforms and investments that meets the criteria set out in Regulation (EU) 2024/1263, as has been the case with the Spanish Plan.

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