Unstable stability in budgets

The fact that the new Budget Stability Law was passed with the contrary vote of the Socialist Party (PSOE) is very bad news. For three reasons. Firstly, it sends a negative message to the markets. Not in the sense that there is any great gulf between the two major parties on the principle of the fight against the deficit, but that it is impossible for them to agree on details (though not minor ones) on this principle.

Secondly, because this happens, oddly enough, after the agreement reached last August to embed this policy in the Constitution, an agreement whose concrete details were to be left to the law now in question. The Popular Party (PP) and the PSOE seem to be defying the principle of Roman law that if the greater thing is possible, so is the lesser: they managed to agree on the difficult part, a constitutional amendment, and now cannot do the same with the legislative details.

And thirdly, because the absence of consensus erodes the strength of the norm itself, portending its possible modification when the next change of government comes along. Something which has already occurred with previous budget stability laws, recast after another party came to power. That such instability should affect precisely a norm that calls for stability, goes beyond mere paradox. It damages Spain’s image of reliability and seriousness, as a country capable of giving continuity to essential policies.

These negative effects are hardly compensated by scraping together a partial consensus on this matter among other parliamentary groups, including the Catalan nationalists of CiU, who attacked last year’s constitutional amendment on the grounds that it broke the consensus surrounding the Spanish Constitution of 1978 — while now, by voting for its details, it implicitly accepts that amendment.

If last year’s consensus was down to the two major parties, the blame for the present dissension has also to be attributed to both of them. To different degrees, however, for the party in power always bears more responsibility, having more instruments at its disposal to make a pact palatable; and because the law’s text infringes the spirit of last August’s agreement.

To wit: it was agreed that the law would impose not a zero deficit, but only a ceiling of 0.4 percent of GDP, in line with the EU Treaty, which is now treated only as an exceptional case. This is what allows a margin, if only a small one, for the development of counter-cyclic policies, and made consensus possible on the constitutional amendment. If the government has shown flexibility to obtain CiU’s votes by modifying the timeframe, why has it not done something of the sort with the PSOE?

Such agreement ought to be possible in the law’s passage through the Senate. It could also be improved in other aspects, such as the nature of the sanctioning authority for non-complying administrations: incorporating the views of some experts, that this function should be taken out of government hands, and confided to an independent body.