Spain faces budget battle in Congress as Brussels pushes for unpopular cuts

Spanish Prime Minister Mariano Rajoy’s second term in office is promising to be a difficult  one, after the main opposition party pledged to fight his 2017 budget tooth and nail.

The Socialist Party (PSOE) spokesman in Congress, Antonio Hernando, on Tuesday declared that his group will vote against the government’s draft budget for next year.

After a 10-month political paralysis that ended on October 31, when Rajoy was sworn into office thanks to a Socialist abstention at an investiture vote, Spain now urgently needs to draw up an economic plan for the coming year.

Brussels has just issued a new warning to Spain

But Rajoy now heads a minority government that will need support from other congressional groups to get legislation passed. And much of the opposition has already said that it will not support further cuts after years of harsh adjustments during the economic crisis.

“Although we are still unfamiliar with the budget, it is evident that it will be impossible for us to support it, because it will be a continuation of past policies and an anti-social budget,” said Hernando at a press conference in Congress.

Dashed hopes

The Popular Party (PP) administration had been hoping that it would not have to effect the €5.5 billion cuts that Brussels is demanding in order to reduce Spain’s structural deficit.

Instead, the government hoped to fall back on strong economic growth to meet the EU’s deficit target of 3.1% of GDP for next year. Earlier this week, Economy Minister Luis De Guindos and Finance Minister Cristóbal Montoro made statements to that effect.

But Brussels has just issued a new warning to Spain: even though the economy is growing at a brisk pace this year, 2017 will be worse than expected and Madrid cannot hope to meet its deficit goals without cuts.

The European Commission’s forecast, to be released on Wednesday, shows 3.2% growth for 2016, down to 2.3% for 2017.

English version by Susana Urra.