ALTHOUGH Spain’s interim government has far reaching powers which allow it to ignore parliament in many areas, it is precluded from making any changes to the 2016 budget without obtaining a majority vote of approval in the Cortes so it had to seek approval for additional measures in order to try to cut the public deficit to the 4.6 per cent imposed on it by the European Union.
For once, three parties, the PP, PSOE and Ciudadanos co-operated and voted the measure through although the PSOE did ask for a change in the law on October 20.
The main measure to increase income is to make companies pay corporation tax earlier and it is hoped that this will inject around €8 billion into the economy and if that works then the EU may decide to grant a further €2 billion in aid which it was considering withholding.
Bad news for companies may be good news for the economy in the short term, but the draft 2017 budget indicates that Spain is unlikely to be able to meet its obligation for further reduction in deficit in the coming year.
Depending upon discussions taking place next week, there may be a government in place if PSOE decide to abstain in a vote of confidence, or a third election will be due to take place in the latter part of this year.
Whatever the outcome, whoever wins will collect something of a poison chalice in respect of fiscal matters and the deficit.