The Government is back on track with the Budgets: it will approve the deficit objectives again this Tuesday

The Government returns to the spotlight with the Budgets. Less than a week after the PP overturned the deficit path proposed by the Treasury in the Senate – a necessary step to present the draft bill – the Executive will bring the same deficit objectives that were rejected in the Upper House to the Council of Ministers this Tuesday. This was confirmed by the Minister of Economy, Carlos Body, in an interview with Spanish Television.

“Tomorrow [Tuesday], after the Council of Ministers, the first vice president herself will announce and present the objectives. The important thing is to take these initial steps for the subsequent approval of the Budgets,” Corpo stated in statements to TVE reported by Europa Press.

The head of the Economy emphasized that the approval of these objectives is necessary to “alleviate the situation of the autonomous communities and give them greater flexibility” for 2024. “In fact, many of them have already approved or proposed their budgets based on the additional objectives that the Government provided,” the minister stressed.

The Council of Ministers will once again approve the deficit limits that the State, communities, and town councils can incur to prepare their public accounts without any change. These limits determine how much each administration can spend. According to sources from the Ministry of Finance, the idea is to present the same figures that the Senate rejected last week. That is, a deficit limit of 2.7% for the central government, 0.1% for the communities, 0% for town councils, and 0.2% for Social Security.

From the Government’s body, the deficit path will head towards Congress. It will likely receive the endorsement of the Executive’s parliamentary partners, as it did on January 21. The big question is what will happen when the stability objectives return to the Senate, where they will once again face the Popular Party’s absolute majority. The Treasury does not provide a deadline and indicates that the initiative will be processed again based on the decisions of the Congress and Senate tables, respectively.

The PP has made it clear that its decision will be “no” if the Government does not meet a series of conditions. This includes tax reduction, new stability objectives, and the creation of a state fund to finance regional public services. These demands have been rejected by the first vice president and Minister of Finance, María Jesús Montero.

The negotiation is at a standstill, and it is unknown what will happen next. The budget stability law does not specify the outcome when a double parliamentary blockade occurs. Furthermore, given the suspension of fiscal rules between 2020 and 2023, there is no clear prior deficit path that is in place.

The outcome is open to interpretation. Montero argues that if the Senate rejects the stability objectives, the deficit limits that the Government sent to Brussels in April 2024 in the Stability Program will be automatically applied. The PP, on the other hand, believes that the Government will not be able to present a draft General State Budget. However, they maintain that the budgets already approved by the autonomous communities would remain in effect, an interpretation rejected by Montero.

If the PP’s interpretation prevails, the only alternative for the Government is to try to reform the organic budget stability law to remove the Senate’s veto power. This process would slow things down further and require an absolute majority in the chambers.

On the other hand, if the Government’s interpretation prevails, a second rejection from the Senate would be needed for the Executive to take the preliminary draft of public accounts to the Council of Ministers. The Treasury has been silently working on this text for months to expedite the process once the first draft is presented.

Even if the Government manages to approve a draft law in the Council of Ministers, there will still be obstacles to overcome. The Executive will need to reach agreements with its various parliamentary partners, including Junts, which has already expressed its opposition.

Behind the scenes work