Airef criticizes the fact that it is blindly calculating public defense spending.

MadridHow much does the Spanish government spend on defense? And what is the fiscal impact of this spending? These are questions the Fiscal Authority asked itself when preparing the report on budget execution for 2025, but it has been unable to answer. The agency chaired by Cristina Herrero criticizes the agency for being blind in its calculation of public spending in this area and its impact on the deficit and debt, although the Spanish government intends to reach 2% of GDP on defense by 2025 to comply with NATO.

"We don't have the information," Herrero stated at a press conference this Wednesday, coinciding with the presentation of the report. "It is practically impossible to know what impact defense spending will have in terms of national accounting [current expenditure]," reiterated the president of the supervisory body. Amid this lack of knowledge, Airef has also included the credits that the Spanish government is approving, taking into account the current budget extension (the 2023 State accounts remain extended). In particular, Airef asserts that it "cannot determine" which credits are in line with the budgetary plan. 10.471 billion euros announced by Pedro Sánchez to meet the 2% defense target this year. According to the Fiscal Authority, this lack of information regarding public defense spending is one of the main risks to fiscal control, coupled with the uncertainty surrounding Donald Trump's tariff policies and their impact on the economy.

Contradictions with the spending rule

The report presented this Wednesday is key to fiscal oversight and takes into account the data available to date for the 2025 fiscal year. The report's objective is to determine whether there is a risk of non-compliance with any of the fiscal rules (spending, deficit, or debt) this year and, if so, whether this is the case. This is why the lack of transparency regarding defense spending is of such concern to the Airef: it cannot accurately calculate to what extent, for example, it puts upward pressure on the state deficit.

This year, however, the Airef has focused on the spending rule, taking into account both European and Spanish regulations. The reason, as Herrero explained, is that there are no new debt or deficit targets (the 2023 reference rates remain in effect).

Given this, the Fiscal Authority has detected an "inconsistency" between the European and Spanish frameworks. Thus, if the State were to comply with the European spending rule, the state would not. Specifically, the Airef estimates that net state spending growth in 2025 will be 4.6%, which is above the benchmark agreed in the Spanish government's Structural Fiscal Plan (3.7%). But this deviation falls within the limits permitted by Europe: it establishes a maximum deviation of 0.3% of GDP (€4.5 billion), which is precisely the difference between current net spending growth (4.6%) and the established benchmark (3.7%). If the European limits are not met, the European Commission could demand corrective measures either on the expenditure side or on the revenue side.

On the other hand, if the Spanish spending limit rule is taken into account, Spain does not comply. By subsector, the central government would breach the rule with a net spending growth of 6.5%, which translates into an "excess" of €5.6 billion. The autonomous communities, in turn, also fail to comply. In this case, net spending growth is exceeded by €5.3 billion. A total of around €11 billion.

"Noncompliance with the Spanish rule is compatible with compliance with the European rule," Herrero indicated. In fact, Brussels ignores the Spanish rule, which, for years, no government has complied with. In the eyes of the organization, the Spanish regulatory framework has been "overtaken" by the European framework. "Clear, unique, and enforceable rules must be adopted," indicated Herrero, who demanded a reform of the Spanish financial stability regulation.

Spain is not France

Finally, Airef wanted to make it clear that the situation in Spain "is not that of France," which has just announced a cutback plan. For starters, the agency has improved its public deficit forecast for 2025, placing it at 2.7% of GDP (2.4% if expenditures for the National Debt Relief Act (DANA) are not taken into account). "Spain does not have the need or pressure" from France to make cuts, Herrero said. "France has a very high deficit and a debt that has even reached higher than ours," the agency's president indicated. Specifically, Airef forecasts that Spanish public debt will reach 101.4% of GDP in 2025.