23) «Spanish Budget for 2014»

by Javier Carro

Topics: Economy, Frontpage

October 4, 2013.

Budget Minister (“Ministro de Hacienda”) Cristóbal Montoro, called next year’s budget «the budget of the recovery…»

–  «Rigorous, austere, and committed to reducing the public deficit,» he told

The Spanish government outlined an austere 2014 budget that includes further cuts in spending by its ministries and a salary freeze for public employees despite the country’s emergence from recession.

The budget highlights the huge imbalances created by five years of economic crisis: Spain will set aside €36.6 billion ($49.5 billion) to service its fast-rising pile of public debt, €2 billion more than it will spend on the 13 government ministries.

And it is pledging about €31 billion for welfare and entitlements, up almost 20% from last year. That includes unemployment benefits for the more than a quarter of the working population that is registered as out of work.

Spain will keep public sector wages frozen for a fourth straight year, while pensions will grow by a meager 0.25% next year.

Recently, the Spanish government raised its estimate for gross domestic product (GDP) growth next year to 0.7% from an April estimate of 0.5%. It said private consumption, which has been depressed since Spain’s massive housing bubble burst in late 2007, will grow marginally next year and exports will keep growing at a robust pace.

Finance Minister (“Ministro de Economía”), Luis de Guindos, said he expects the economy to start adding jobs in the second half of next year. He lowered the government forecast for unemployment—to 26.6% by the end of 2013 and 25.9% in 2014.              

Wishful thinking of the Spanish Government?

–  It could be questioned some of the assumptions the government is using for next year’s budget, such as the expected rate of economic growth and the cost of servicing debt.

–  The incipient economic recovery has been driven by strong exports, making it vulnerable to external shocks. If European growth slows, Spain will see lower sales of automobiles and other products it manufactures for export.

–  Another potential snag is the cost of borrowing. The government has budgeted interest costs for 2014 that average 4.3% for 10-year government bonds.

–  Spain hasn’t had borrowing costs this low over a long period since 2010, and there is no certainty that they will remain low over the coming year.

Experts and economists are less optimistic….∎

Leave a Comment Here's Your Chance to Be Heard!