Spain's fiscal plan gains EU approval despite budget absence

On November 26, 2024, the European Commission endorsed Spain's fiscal adjustment plan, which aims to reduce public debt and deficit levels over the next seven years. Although the Spanish government has not yet presented its draft budget, Brussels found the proposed fiscal framework credible, outlining a commitment to a downward trajectory for debt and aligning with EU requirements. The plan projects a reduction in public debt from 102.5% of GDP in 2024 to 98.4% by 2027, while cautioning that it will still exceed 90% in 2031, marking the end of the adjustment period. The Commission acknowledged Spain's efforts in justifying an extended adjustment period based on various reforms, similar to those implemented by other EU nations. Nevertheless, concerns remain regarding the government’s ability to meet its deficit reduction targets, especially as forecasts suggest a potential rise in the deficit for upcoming years, leading to warnings from Brussels about the risk of not adhering to these commitments. As a result, while Spain's fiscal plan aims for fiscal responsibility, the lack of a budget and potential shortfalls in deficit targets raise questions about its future effectiveness.