SPAIN has received yet another warning from the European Commission over its high debt and unemployment risk
“Spain is experiencing imbalances,” said the European Commission on Monday as it released its spring package of recommendations.
It warned that Spain’s “vulnerabilities relate to high external debt, public and private, in a context of high unemployment, and have cross-border relevance”.
The European Commission proposed on Monday to extend a moratorium on EU fiscal rules until the end of 2023, but kept the option to open sanction procedures against EU countries that stray from its fiscal recommendations.
Spain was among a list of countries called on to exercise restraint in public spending.
Brussels acknowledged risk that if not, Spain could see public indebtedness reach a higher level in 2026 than in 2021.
Spain’s public deficit soared in 2020 from 3% to 10% fuelled by mass public spending during the pandemic although it was reduced to 6.9% in 2021 as the economy bounced back.
But to avoid rising debt as the government tackles issues caused by the war in Ukraine such as energy price hikes, the EU called on the Spanish government to “ensure prudent fiscal policy” in 2023.
“In particular by limiting the growth of domestically financed current expenditure to below potential output growth in the medium term, taking into account the continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine”.
Moreover, the European Commission calls on the country to be prepared to “adjust current spending to the evolving situation”.
“For the period beyond 2023”, Brussels continues, the Spanish government should establish policies aimed at “achieving prudent fiscal positions” and “ensuring a credible and gradual reduction of debt”, promoting progressive consolidation.