A closer look at the dire state of Spain’s public finances

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BrusselsReport.eu
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Spanish Prime Minister Pedro Sánchez (Copyright: By Ministry of the Presidency. Government of Spain, Attribution, https://commons.wikimedia.org/w/index.php?curid=107027542 )

By Spanish economist and entrepreneur José Ramón Riera

As the end of Spanish Prime Minister Pedro Sánchez‘s term in office is getting nearer, it is time to take a look at his rather poor legacy, whereby he may well go down in history as the worst Prime Minister of Spain during its democratic era.

This sounds perhaps very blunt, but when taking a look at my analysis below, I believe there can be little doubt thatPedro Sánchez Castejón, will once be named Pedro Sánchez “The Worst”.

In 2018, and after several years of suffering because of how another socialist government left the country, that of Rodríguez Zapatero, Spain was once again at the forefront of European economic growth. Spain was the fastest growing country, it was the fifth economic power in the European Union (the United Kingdom was still there) and everyone recognised the effort made by the government, but above all by the country. The latter had had to shoulder all the efforts, without those that had destroyed the country’s economy and ruined it having to pay for the consequences. Not even the managers of the savings banks had to pay with their assets for the damage they had done to the country.

At this occasion, I would like to highlight the sacrifices of all those businessmen who lost all their assets and were ruined at that time, and who had to witness how those that bankrupted them were able to get away with it so easily, as some of them even continued as saviours of their homelands, thereby paid for by rabid Communists from Venezuela, the Sao Paulo Forum and the Puebla Group.

At the end of 2017, Spain was once again an armed ship, full of fuel and with a crew ready to face whatever was to come in the next few years. What it was not prepared for was the sudden change of all the commanders, who were also badly suited to steer the ship.

What we are going to see below, is the exact opposite of what has been written so far and what has been implemented by the government that replaced the PP and which is made up of socialists and communists, along with separatists.

At the end of 2017 we saw a picture that could undoubtedly be better, but if we had continued along the same lines, we could have finished balancing and today we would be much better off.

At the end of 2017, we were starting from a public expenditure of 41.3% of GDP, which could have been perfectly controlled with successive GDP growth and maintaining expenditure without the need to reduce it, we would have reached 2019 with an expenditure of 38.6%, and maintaining taxes we would have achieved a surplus of 8,000 million euros.

However, the procacity in spending that comes from everything that carries the word socialism leads to the fact that year by year until the end of 2021, which we have official data in Eurostat, we find that in just 4 years time, Spanish public spending has gone from 38.6% to 52.4% of GDP, but with the data that I have on the table today, in 2022 public spending can easily reach 660. 660 billion euros and given that GDP growth will not exceed 2%, we see that Spanish Public Expenditure is projected to rise to 55.6% of GDP and we will only be surpassed in the European Union by another terribly governed country: France.

With this table, we see that the GDP at constant prices since the socialist landing, will have been 2.2% in a five-year period, equivalent to what happened to us with the previous crisis from 2008 to 2012.

If we continue with the variable Taxes, we see that in 2017 it had already reached tremendously worrying levels for the citizen, taxes already accounted for 38.2% of GDP.

The socialist voracity is insatiable, almost at the same level as the prodigality in spending. So much so that, in 2021, according to official data, the Spanish tax burden accounted for 45.3% of GDP and at the current rate of revenue, we will very possibly reach 49.2% in 2022, whereby we will find that while GDP will only have grown by 2.2%, they will have carried out a scrupulous task of leaving those who have to generate wealth in the country, consumers with their spending and businessmen with their investment, without liquidity.

The Spanish debt and deficit are out of control

If we then look at the deficit variable, we find that the Partido Popular (PP), which governed in 2017, missed the EU’s deficit requirement by one tenth of a percentage point, with the importance that the accounts were clear and reliable, unlike those left by José Luis Rodriguez Zapatero, who officially declared a deficit of 6% while the reality was almost twice as high.

The economic situation in 2012, the year the PP began to govern, was dramatic, not so much because of the debt, which was very high, but because the markets doubted whether Spain was capable of changing course or whether it would join Greece and Portugal and need the intervention of the EU with the International Monetary Fund.

Rajoy left a 3.1% deficit and a General State Budget that socialism was able to consume, but which allowed him to leave an official deficit in 2018 of 2.6% of GDP.

Since then, the deficit has always exceeded 3%, even in 2019 when it reached 3.1%. In 2020 the deficit was 10.4% and in 2021 it officially reached 7.1%. In 2022, even if it is projected to fall in percentage terms, my estimate is even 100 billion euros. That is more than what the Ministry of Finance has forecast in its last submission to Brussels, which was almost 65 billion.

The problem is that in 5 years, the socialist and communist coalition government elected by President Pedro Sánchez will have generated a deficit of 342 billion in its five-year term of office.

The big question I ask myself, and I do nothing but pass it on to everyone, is: where have hose 342 billion euros gone, what have they been spent on, what have they been used for?

I have no explanation as to how 342 billion euros could have evaporated without anyone seeing them.

Next up is the Spanish public debt, to finish this analysis. Rajoy left us in a worrying situation, the debt had already exceeded 1.183 trillion euros and represented 101.9% of GDP.

But with the deficit generated by this government, we have reached 1.427 trillion euros in 2021, with real and official data, which represents 122.6% of the debt as a percentage of GDP. Everything indicates that we will get very close to 1.534 trillion euros, which will lead us to have a debt over GDP of 129.2%.

With these figures, Spain is completely ruined. Excuses such as the COVID-19 pandemic or other serious incidents that have affected us are not acceptable, because the policies of the current coalition government to deal with this, have worsened our comparative position with other European countries, adopting, moreover, less than exemplary measures such as two unconstitutional states of alarm that paralysed the economy, the temporary closure of Congress, the delegation of powers that chaotically hindered mobility and trade between 17 autonomous communities, the increase in public salaries, the fattening of ministries, cabinets and unnecessary ideological advisors that do not improve management, etc.

As a result, Spain seen five years of growth evaporate, but everything indicates that in 2023, we are not going to grow or it is going to be a ridiculously low growth. Meanwhile, expenses are going to grow by no less than 12%, income is going to take a huge slap in the face because we are not going to grow, inflation is going to be contained, so income is not going to grow any more, and therefore, the deficit could go to crazy levels as will the debt, with its corresponding unpayable interest. A macro picture for 2023, the election year, further reveals that the Spanish government is preparing budgets aimed at winning votes even if it is generate a higher deficit.

GDP grows by 1%, which is an optimistic estimate today.

Loose public spending 

Looking at Consolidated Public Expenditure, we can see this amounts to 583,000 million by the Central State Administration, and combined with the spending of the Communities and Local Corporations, it is reaching 61.6% of GDP. Tax income is projected to fall by 2% of revenue due to the crisis, resulting in a deficit of 13.8% of GDP and ultimately a Spanish national debt of 1.7 trillion euros, which, without the backing of the ECB, which it will not be able to grant Spain, means going into default.

An economy broken by public spending, incapable of raising taxes and a deficit in 6 years of more than 500,000 million that will have evaporated like the water in the marshes when it is hot and it does not rain, will cause Spain to be bankrupt, with the ECB or the EU unwilling or unable to help, perhaps even kicking Spain out of the euro, which may even lead to the breakup of the eurozone and “every man for himself”.

Unfortunately, this is not a nightmare, but simply an economic analysis of the track record of a government managed by socialists and communists with separatists that are subverting legality, that are keen to bring about the fall of the monarchy, that want to change Spain’s 1978 Constitution, that want to confront us and miseducate us, and that, like all comparable regimes, want to perpetuate themselves in power by controlling the judiciary, the media and the security forces of the State and even, if necessary, the Armed Forces.

The current Spanish coalition government is clear about the path it is following and is not going to go off the rails, even if it means taking Spain, the Euro and Europe with it. It is up to Spanish citizens to defend the rule of law and apply our Constitution, to continue working, not to fall into the traps of demagogy, and it is up to young voters to vote intelligently in 2023, so as not to mortgage their future even more.

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