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PGE-2021: More expansive than expected

This is no time for fiscal austerity. We need governments that encourage demand and actively participate in promoting new projects and activities; that take advantage of the conjuncture to accelerate urgent and necessary transitions in the energy and environmental sphere, in digitization and circularity. This message is, in essence, shared by the European Commission and less suspicious organizations such as the International Monetary Fund or the OECD.

But this basic force idea must be specified in light of the possibilities and shortcomings of each country. And the Spanish case stands out for a problem of structural deficit and a mediocre reputation with regard to fiscal stability. For this reason, we cannot be as expansive as other European countries with much greater margin. And, for this reason, it is essential that an extraordinary fiscal impulse such as the one reflected in the accounts for 2021 is accompanied by a scenario of fiscal consolidation five years ahead, credible and that explains how we are going to return to normality and eliminate our structural deficit at once.

This has several implications. The first is that the PGE-2021s should be more selective. All games grow substantially. From Defense, to the Royal House, through the jump in housing or in FP. It is perfectly understandable that the PGE-2021 reinforce spending on protection items for those most affected. The ERTEs have been a very good solution and must be extended in some branches. The Minimum Living Income was a shortage that we had been carrying for a long time and the crisis makes it particularly necessary. The European Recovery Fund carries a necessary boost to exogenously financed investment.

But I am convinced that in many other sections the freezing of games could have been chosen. This would allow us to contain the expected growth in spending and contain the deficit. With these accounts and the worsening growth expectations in 2021, I fear that the deficit will remain above 10%. Because the income will not reach what is reflected in the document. Beyond some tax increases with a very moderate tax impact, the implicit commitment is to very high tax elasticities and a GDP growth that is only achievable if, in spring, we already have effective vaccines that are widely distributed among the most vulnerable population.

In short, I agree with the need and opportunity for a fiscal boost. But it should be more selective and be integrated into a multi-year strategy that includes an in-depth tax reform and a review of spending and public administrations that allow improving the efficiency of public management.

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