Airef urges reform of the financial crisis stability law: "Did anyone think it could be complied with?"

MadridMore than ten years ago, in the midst of the Great Recession, the two main parties in Spain, the PSOE and the PP, agreed to a constitutional reform to adopt and comply with the fiscal stability demanded by Brussels of the most indebted countries. This led to the creation of a permanent constraint on public spending enshrined in the Spanish Constitution under the name of "budgetary stability," paving the way for the government of Mariano Rajoy (PP) to later pass the so-called Budgetary Stability Law in 2012. All of this required public administrations to be very restrictive with spending.

"Did anyone really think we could comply [with the rule]?" asked the president of the Independent Authority for Fiscal Responsibility, Cristina Herrero, at a press conference on Monday. The Independent Authority for Fiscal Responsibility (AIReF) has illustrated this point as follows: since 2013, compliance with the budget stability or deficit target has only been achieved in three of the seven years it has been in effect (fiscal rules were suspended in 2020 due to Covid-19 and have returned in 2024). This reflection coincided with AIReF's presentation of a proposal to reform the current Spanish fiscal framework. "We need a fiscal framework suited to the [Spanish] reality and the challenges of the economy," Herrero stated. The Fiscal Authority believes that we have reached a point of "lack of realism and credibility" and "problems of enforceability and even inapplicability [of fiscal rules]," as well as a "deficient integration of the decentralized reality [of the administrations within the State]." As a starting point, it urges the adoption of the European fiscal framework that was implemented after Covid-19. After being suspended during the worst years of the pandemic, European fiscal rules have returned, but in a different form. Although deficit (3%) and debt (60% of GDP) targets still exist, the spending rule now takes precedence. However, the Stability Law makes no mention of this rule. "It should be the focus of supervision. [...] This lack of coherence increases uncertainty and hinders proper application," reflects the Independent Authority for Fiscal Responsibility (AIReF). They also believe it is necessary to redefine and make more transparent the criteria that establish the distribution of the rules, for example, the deficit target for each administration. In fact, member states must transpose the European directive before December 31, 2025, and although the Ministry of Finance intends to do so, AIReF fears they will fall short, especially if the Ministry only proposes modifications via royal decree-law, and not a reform of the Law of Deputies. Beyond the European framework

In terms of oversight, AIReF also wants its own operations to be adapted to the new European framework and its credibility, effectiveness, and implementation of preventive and corrective measures to be strengthened. It also wants not only the central government to present a structural fiscal plan, but also the 17 autonomous communities, the main municipalities, and the Social Security system, to ensure greater transparency. Finally, it wants independent analyses to be carried out on forecasting errors by public administrations and for the impact of climate change to be incorporated as a factor to be considered in the budgetary framework.