The PP will overthrow the deficit path, but does not rule out negotiating if taxes are lowered and more margin is given to the communities
The PP will overthrow the Government's deficit path next Wednesday in the Senate thanks to the absolute majority it has in the Upper House. This was announced this Monday by the PP Deputy Secretary of Economy, Juan Bravo, in a press conference held at the party's national headquarters.. The negative vote of the popular ones threatens to torpedo the process of preparing the General State Budgets in which the Government is immersed. The stability objectives – also known as the deficit path – are an essential prior step for the preparation of public accounts not only of the State, but also of the regional and local administration.
Although the popular vote will be 'no', the main opposition party is open to reconsidering its position if the Executive gives in to a series of demands. The first of them is a tax reduction that includes a deflation of personal income tax – that is, an adaptation of the tax brackets to the rise in inflation or salaries -, a reduction in taxes on energy and expanding the reduction in food VAT to meat, fish and preserves.
Furthermore, the PP will demand a distribution of the deficit objectives between the State and the autonomous communities that is more favorable to the latter.. The objectives approved by the Government allow the autonomous communities to close their budgets with an imbalance between income and expenditure of a maximum of 0.1% of GDP, while the State reserves 2.7%, Social Security 0, 2% and local corporations 0%. Juan Bravo suggests that a balanced distribution could be 90% for the State and 10% for the autonomous communities, which would translate into a deficit limit of 0.3% of GDP for the autonomous sector.
The popular ones will also demand that the Government commit to respecting fiscal autonomy in all the autonomous communities.. Bravo has harshly criticized initiatives such as Sumar's, which proposes creating a state tax to tax inheritances in the autonomous communities that subsidize the tax on inheritances and donations.
As a last condition, the PP will demand that the Government create an autonomous fund to finance education, health and social policies of regional governments.. Although Bravo did not want to get involved with a figure, he did point out that the current Minister of Finance, María Jesús Montero, already proposed in 2017 the creation of a similar instrument endowed with 16,000 million euros.. This fund would also affect all communities, not just the underfinanced ones, Bravo added.
The Minister of Finance herself has reacted to Bravo's words this morning. “The demagoguery of the PP to vote against the stability objectives cannot hide the reality: the autonomous communities have received with the Government of Pedro Sánchez the largest resources in their history,” said the head of the Treasury in a message published in social network
Will budgets fall?
If the PP vetoes the Government's initiative in the Senate, the deficit path will have to go through the Council of Ministers again and go through the filter of the Congress of Deputies, which it barely surpassed last time.. The question is what will happen when the Executive finds itself facing the PP wall in the Senate for the second time.
The lack of precedent in this situation has opened the door to different interpretations about what would be the fate of public accounts.. The PP maintains that a second veto in the Senate would put an end to the State budget process. However, Minister Montero affirms that in this case the deficit objectives that the Government sent to Brussels last April in its Stability Program would be applied.
The first vice president says she has a report from the State Attorney's Office—the content of which has not been published—that supports her interpretation of the budget stability law, the rule that regulates the procedure.. Furthermore, the mess has one more twist. And Montero maintains that, if the PP's interpretation is true, not only the General Budgets of the State would decline, but also those of the autonomous communities, governed mostly by the popular ones.
Bravo rejects this interpretation and clings to the precedent of deliveries on account in 2019. On that date, the first government of Pedro Sánchez was trying to carry out budgets that also crashed against a majority of the PP in the Senate.. According to Bravo, Minister Montero also claimed to have a report from the State Attorney's Office that endorsed that without stability objectives there could be no deliveries on account.. However, the State was able to deliver the corresponding funds to the regional and local administration from the financing system. Likewise, the PP economic manager points out that the communities prepared their budgets with a spending ceiling of 0.1% of GDP, which was the information they had at that time.
However, the lack of precedents regarding the scenario that would occur if the Senate says 'no' twice to the stability objectives makes it difficult to anticipate how the conflict will be resolved.. In the event that the interpretation of the PP prevails, the only alternative that would be left to the Government would be to modify the budget stability law.. An extreme that would further distance the approval of public accounts that are already two months late.