The European funds of the Recovery, Transformation and Resilience Plan are vital to the Spanish economy. This is reflected in government budget plans and estimates of its impact as a catalyst for the economy. For this reason, the independent authority for fiscal responsibility (AIREF) criticized the executive on Tuesday for missing data. “The government believes that there is sufficient information. While there is a lot, in our opinion it is very disaggregated and scattered. Knowing the real impact on the economy requires a different kind of information. Until it is deployed, it is difficult to continue, ”accused Cristina Herrero, President of Airef, this Tuesday.
With the information available, Herrero says the task of monitoring and predicting the impact that the arrival of European manna will have is complicated. “It is very difficult to assess the economic impact, although we have already revised down our forecasts for the multiplier of these investments due to the most unfavorable circumstances at the moment,” added the President of the body that oversees the public accounts in Santander, during their participation at the seminar organized by the Association of Economic Information Journalists (APIE) at the Menéndez Pelayo International University (UIMP). In addition to this reduction in the multiplier effect, Airef is also delaying the impact of the funds on the final years of the plan, an oxygen cylinder that will not be felt heavily until at least 2023.
Meanwhile, the government is sticking to its position: there is enough information. This is partly correct, as data on amounts granted, committed or transferred to the Autonomous Communities are regularly transmitted. However, the gap arises when it comes to supplementing this with actual spending figures. That is, the implementation that has already reached street level and has a multiplier effect on the local economy. There, the Airef delegates tasks to both the executive and the autonomies.
“It is true that the level of information is very detailed in terms of budget and the degree of execution is high. What’s happening is that an important part is transfers, so the communities are the ones who manage those resources and have to bear the costs. For this reason, we ask for execution information from the central administration and the autonomous communities that encounter various administrative problems,” Herrero explained. In addition, he clarified that public administration needs resources to deal with this tsunami: “They have scarce resources in many cases to take care of the traditional structural funds and also those of the next generation”.
increase the debt bill
The President of Airef used her participation in the UIMP summer courses to explain the work of the organisation. Repeating the need for Spain to establish a fiscal strategy and a credible and gradual deleveraging process. And to point out that the new economic environment will be expensive for the state: as interest rates rise, “the cost of the state debt will increase by another 12,000 or 14,000 million” by 2025, encoded Herrero. The agency already calculated a few months ago that this liability expense has risen to 20 billion for the period 2022-2025, an amount that continues to grow.
These calculations are full of nuances, as Herrero emphasized in his speech: “Everything will depend on how consistent the ECB is with the anti-fragmentation tool [de la deuda de los países de la zona euro] and the revision of tariffs”. The ups and downs of the markets in the last few weeks following the Eurobank announcements and nuances of the measures to be implemented serve as an example on this point.
He also explained the positive and negative impact of inflation on deficit correction. In the short term, the collection increases, which is favorable. In the medium term, however, it will incur additional costs through higher pension payments and higher interest costs on the debt. It turned out that if the pension payments are extrapolated using the CPI, each inflation point costs 1,500 million euros. And there’s 65,000 million in debt associated with the price hike, with each point accounting for an additional 700 million in interest payments. This, together with the current uncertainty and the foreseeable return to community fiscal rules, puts Spain in a precarious position with a deficit and above-average debt. “The structural deficit has increased by half a point compared to before the crisis,” explained the President of Airef.