Pedro Sánchez is headed for a term without a budget.

MadridThe last time Pedro Sánchez managed to pass a national budget was in 2022, during the previous legislature. It was the budget for 2023. Since then, despite the start of a new legislature, the Spanish government has failed to pass any new budgets and, in fact, is headed for the end of its term – Pedro Sánchez maintains that the legislature will last until 2027 – without achieving this. The underlying reason is not only that Congress rejected the deficit and debt targets for 2026 this Thursday, the necessary step before drafting a budget, but also that Junts has closed the door to negotiating a budget for next year. Given that the electoral climate will be a major factor in 2026 and 2027, unless early national elections are called, it is difficult to imagine that the context will be more favorable for budget negotiations then. The only "window of opportunity" that some members of the Spanish executive foresee is the return of Carles Puigdemont, a very open scenario that is in the hands of the courts.

"Everyone has seen that the arrogance and broken promises [of your government] have blocked the legislature and will leave your country [Spain] without a general budget for another year," Josep Maria Cruset (Junts) told the Minister of Finance, María Jesús Montero, during her speech in Congress regarding this deficit and debt, as the PP and Vox also did.

In the midst of a break with the PSOE, the Junts deputy did not hesitate to use the harsh tone to which the Junts spokesperson in Madrid, Miriam Nogueras, is known. "Don't you know the deadlock your government is in?" Cruset asked Montero, whom he reproached for living in a "parallel reality [...] where everything is beautiful and rosy." It's worth remembering that in 2024, Junts already voted against the deficit and debt targets, which are the same ones the Treasury has now put forward. The Junts members were demanding, once again, more leeway for the autonomous communities, for whom the Treasury is proposing a deficit target of 0.1% of GDP in 2026, 2027, and 2028.

Head-to-head with the PP

Although at the start of the debate Montero appeared "confident" that she could sway the positions of the parties that had already expressed their reservations about the deficit and debt targets, within the Ministry of Finance, a parliamentary defeat on Thursday was inevitable. In any case, Montero took the opportunity to once again attack the PP, with whom she is engaging in a direct confrontation on the ideological front as the elections in Extremadura approach. Montero pointed the finger at the Popular Party for voting against "protecting the welfare state." "[Voting against the deficit and debt targets] is like throwing dirt in your eyes," Montero reproached them. "They have to explain why they demand more resources for the [autonomous] territories and then, when push comes to shove, they vote against it," she reiterated. The Treasury estimates that the average annual spending margin for the autonomous communities would be €1.755 billion (€5.485 billion on average between 2026 and 2028). In the case of Catalonia, this amounts to €1 billion between 2026 and 2028. The fact is that at last week's Fiscal and Financial Policy Council (CPFF) meeting, the Popular Party councilors already voted against the measure. During the debate, however, the minister avoided further straining relations with Carles Puigdemont's party and did not directly criticize them. That task fell to Salvador Illa, who participated in a forum in Madrid for the second consecutive week: "I don't understand why some Catalan parties voted against granting the Catalan government an additional €1 billion in investment capacity," Illa stated. According to Isla, these were resources that would have gone to finance the healthcare system and the welfare state. "I didn't expect much more from some parties, but I did from others," he added, referring to the PP and Vox. Podemos and Compromís were also not kind to the Spanish government and abstained. The latter was particularly harsh: "This government comes in listless and without negotiating," criticized the party's spokesperson, Ione Belarra. This lack of negotiation was also noted by the other parties in the investiture bloc, from ERC to the PNV, although they voted in favor. What's the next step?

Now the Spanish government must approve new deficit and debt targets within a maximum of one month and resubmit them to Congress. Montero has already confirmed that she does not intend to throw in the towel and will present the same targets again. If they fail a second time, the deficit and debt targets from the last structural fiscal plan sent to Brussels will be adopted, which should not require congressional approval. Although this plan does not detail specific targets for subsectors, the Treasury interprets this scenario as implying fiscal balance for the autonomous communities. This means that the deficit target for the communities would be 0% of GDP. Therefore, less spending leeway. Thus, the preparation of a budget for next year would continue, as Sánchez has committed to, even though it is doomed from the start.