Europaudvalget 2016
KOM (2016) 0518
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EUROPEAN
COMMISSION
Brussels, 27.7.2016
SWD(2016) 263 final
COMMISSION STAFF WORKING DOCUMENT
Analysis by the Commission services of the budgetary situation in Spain following the
adoption of the COUNCIL RECOMMENDATION to Spain of 21 June 2013 with a view
to bringing an end to the situation of an excessive government deficit and the COUNCIL
DECISION of 12 July 2016 establishing that no effective action has been taken by Spain
in response to the Council Recommendation of 21 June 2013
Accompanying the document
Recommendation for a
COUNCIL DECISION
giving notice to Spain to take measures for the deficit reduction judged necessary in
order to remedy the situation of excessive deficit
{COM(2016) 518 final}
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1.
I
NTRODUCTION
On 27 April 2009, the Council decided, in accordance with Article 104(6) of the Treaty
establishing the European Community (TEC) that an excessive deficit existed in Spain and in
accordance with Article 104(7) TEC issued a recommendation to correct it by 2012. Since
then the Council issued three new recommendations to Spain on the basis of Article 126(7) of
the Treaty on the Functioning of the European Union (TFEU), on 2 December 2009, 10 July
2012 and 21 June 2013, extending the deadline for correcting the excessive deficit to 2013,
2014 and 2016 respectively, as the Council considered that Spain had taken effective action,
but unexpected adverse economic events with major unfavourable consequences for
government finances had occurred.
1
Specifically, on 21 June 2013, in order to bring the general government deficit below 3% of
GDP in a credible and sustainable manner, Spain was recommended to reach a headline
deficit target of 6.5% of GDP in 2013, 5.8% of GDP in 2014, 4.2% of GDP in 2015, and 2.8%
of GDP in 2016, which was consistent with an improvement of the structural balance of 1.1%,
0.8%, 0.8%, and 1.2% of GDP in the years 2013-2016 respectively based on the Commission
2013 spring forecast extended to 2016. To achieve this improvement, additional fiscal policy
measures of 2%, 1% and 1.5% of GDP in 2014, 2015 and 2016, respectively were deemed
necessary.
For 2014, the general government deficit was notified in spring 2015 at 5.8% of GDP, just
reaching the intermediate deficit target set by the Council for that year. However, in autumn
2015 it was revised up to 5.9% of GDP, marginally above the EDP target, on account of a
downward revision in the underlying GDP figure (i.e. resulting in a denominator effect). On
31 March 2016, the Spanish authorities notified to Eurostat a deficit outcome for 2015 of
5.2% of GDP, later revised to 5.1% of GDP, which is almost 1% of GDP above the EDP
headline target for that year. Moreover, the change in the structural balance in 2015 and
cumulated over 2013-15 have fallen short of the targets set out in the June 2013 Council
Recommendation, when measured both in adjusted and unadjusted terms. The fiscal effort
based on the bottom-up method in 2015 and cumulated througout 2013-15 were also well
below what was deemed necessary to comply with the Council Recommendation of 21 June
2013.
On 12 July 2016, following a Commission's recommendation in compliance with Article
126(8) TFEU, the Council adopted a decision establishing that no effective action had been
taken by Spain in response to the 2013 Council Recommendation.
2
In compliance with Article
126(9), within two months from the Council decision establishing non effective action the
Council shall give notice to the country on a new deadline for the correction of the excessive
deficit with a specified adjustment path.
3
This document proposes a new deadline for the correction of the excessive deficit and an
adjustment path that could ensure a durable correction of the excessive deficit. To this end,
sections 2 and 3 present the recent macro-economic and budgetary developments and outlook
for 2016-2018, respectively. Section 4 presents a proposal for a new fiscal adjustment path.
1
2
3
All documents related to the excessive deficit procedure of Spain can be found at:
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/countries/spain_en.htm
.
http://data.consilium.europa.eu/doc/document/ST-10793-2016-INIT/en/pdf
In addition to the requirements of EDP recommendations under Article 126(7), the Council decision to give
notice under Article 126(9) shall not only set the new budgetary targets but also "indicate measures conducive
to the achievement of those targets" according to Article (5)1 of Council Regulation No 1467/1997.
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Section 5 reviews recent developments in Spain's fiscal framework. The last section
concludes.
2.
R
ECENT MACRO
-
ECONOMIC DEVELOPMENTS AND OUTLOOK FOR
2016-2018
Real GDP expanded by 3.2% in 2015.
This was driven by strong private and public
consumption and buoyant investment, especially in equipment. In nominal terms, GDP grew
by 3.8%.
Growth is projected to remain strong in 2016.
The Commission has updated its 2016
spring forecast with information available until 19 July 2016. The update includes, among
others, the quarterly national accounts for the first quarter of 2016. On this basis, the real
growth forecast for this year has been revised upwards by 0.3 pps. of GDP compared to
spring, to 2.9%, due to stronger than projected private and public consumption in the first
quarter of the year, which more than offset weaker-than expected but still strong investment.
The anticipated strength of private consumption can be explained by strong job creation and
low oil prices. At the same time, investment, despite moderating, is still predicted to show
robust growth, especially in equipment but also in residential construction. Exports have been
revised downwards more than imports, bringing the contribution of the external sector to
growth down to -0.4 pps. of GDP, 0.1 p.p. less than in Spring. However, the current account
balance is expected to remain in surplus. Although growth is forecast to moderate during the
second half of this year, it is still projected to remain robust. Nevertheless, and despite the
upward revision to real GDP growth in 2016, nominal growth is projected to be 3.4%, almost
0.2 pps. of GDP lower than anticipated in the Commission spring forecast. The GDP deflator
is now expected to be 0.5% in 2016, whereas HICP inflation is expected to be -0.3% this year,
a downward revision of 0.2 pps. compared to spring.
In 2017, real GDP is projected to decelerate, but still record a robust 2.3% expansion.
This is 0.2 pps. of GDP less than in the Commission spring forecast. The composition of
growth is predicted to change somewhat with respect to 2016, with private consumption
moderating on the back of lower job creation. Nevertheless, employment growth is still
expected to remain strong. At the same time, investment is forecast to pick up slightly, mostly
due to accelerating construction investment, especially residential, as the housing market
bottoms out and financial conditions remain favourable. Investment in equipment is set to
decelerate somewhat on account of greater uncertainty. Both exports and imports are also
forecast to accelerate, allowing Spain to still maintain a current account surplus. Inflation is
predicted to recover gradually over 2017 on the back of higher oil prices, and a slightly lower
euro towards the dollar, with nominal GDP growth reaching 3.6% in 2017, 0.3 pps. less than
expected in spring.
Growth is projected to ease further in 2018 to 2.1%.
Private consumption is expected to
decelerate further, despite declining but still strong job creation, as residential investment
increases and households start increasing their level of precautionary savings. Investment is
expected to increase slightly with dwellings being its most dynamic component, and the
contribution of the external sector becomes positive, mainly due to the deceleration of
imports. Inflation is projected to remain just slightly beyond its level in 2016, at 1.4%, as a
stronger euro more than offsets rising oil prices. Nominal growth is projected to reach 3.6,
same as in 2017.
As Spain enters its 3
rd
year of expansion in 2016, the output gap is projected to start
gradually closing.
It is forecast to reach a value of -1.7% and -0.2% of GDP in 2016 and
2017, respectively, and eventually turn positive in 2018, when it is expected to reach 0.9% of
GDP.
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There are, however, downside risks to the growth forecast,
especially as from 2017,
related among others, to the outcome of the referendum in the United Kingdom on the
membership of the European Union, which has increased uncertainty, with potential negative
implications for trade and domestic demand.
Table 1: recent macroeconomic developments and outlook
2016
2015
3,2
3,1
6,4
5,4
7,5
3,6
0,1
-0,5
-4,0
2,9
22,1
0,2
-0,6
0,6
0,5
2,1
Spring
forecast
2,6
3,0
4,7
4,5
5,8
2,9
0,0
-0,3
-1,5
2,5
20,0
0,1
-0,1
0,9
0,8
2,3
Updated
spring
forecast
2,9
3,3
3,6
2,8
4,3
3,0
0,2
-0,4
-1,7
2,6
19,9
0,3
-0,3
0,5
1,0
2,3
Spring
forecast
2,5
2,3
5,0
5,2
5,8
2,6
0,0
-0,1
0,3
2,2
18,1
0,5
1,4
1,4
1,0
2,1
2017
Updated
spring
forecast
2,3
2,3
4,0
4,6
5,4
2,3
0,0
0,0
-0,2
2,2
18,1
0,3
1,5
1,3
1,1
2,0
2018
Updated
spring
forecast
2,1
1,3
4,2
4,2
3,9
1,9
0,0
0,2
0,9
1,7
16,6
0,4
1,4
1,5
1,6
2,0
Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap
1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the world (% of
GDP)
Note:
1
In % of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme scenario using the commonly
agreed methodology.
Source :
Updated Commission 2016 spring forecast (COM).
3.
R
ECENT BUDGETARY DEVELOPMENTS AND OUTLOOK FOR
2016-2018
On the fiscal side, the updated Commission 2016 spring forecast factors in the latest budget
execution data, which refers to the first-quarter (for the general government), to the first four
months of the year (for the central, regional and social security government subsectors) and
until May regarding the
Estado,
which is part of central government.
4
The updated spring forecast projects the general government deficit to continue to
narrow and to reach 4.6% of GDP in 2016.
This is 0.7 pp of GDP higher than in the
Commission 2016 spring forecast, with differences stemming mostly from a downward
revision of expected income tax revenues. The latter owes partly to a more negative valuation
of the effects of the personal income tax reform, but is mainly explained by changes made to
the legal framework governing corporate income tax instalment payments (pagos
fraccionados),
in force since January 2016. These are expected to lead to a reduction of
corporate taxes paid throughout the year, which would be compensated by higher payments in
the final tax settlement to be made in the following year. This measure amounts to EUR 6 bn
(0.5% of GDP) in the updated spring forecast and qualifies as a one-off according to the
4
See
http://www.igae.pap.minhap.gob.es/sitios/igae/es-
ES/ContabilidadNacional/infadmPublicas/Paginas/administracionespublicas.aspx
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Commission.
5
It therefore leads to a worsening of revenues in 2016 but to an improvement by
the same amount in 2017.
The reduction of the deficit in 2016 relative to 2015 continues to rely to a large extent on
the positive macroeconomic outlook,
which supports tax revenues and keeps social transfers
in check. Moreover, previous improvements in financing conditions and the stabilising public
debt ratio imply that interest expenditure is likely to continue to fall. As in the spring forecast,
the projected improvement in the deficit for 2016 is also the result of saving measures at
central and regional government level put in place by the caretaker government in response to
the Commission Recommendation of March 2016. The 2016 Stability Programme targeted
savings from the new measures at central and regional level in the amount of around 0.4% of
GDP, including cuts in budgetary appropriations (EUR 3.5 billion) and savings from the
implementation at regional level of a new expenditure rule on pharmaceutical and healthcare
spending (EUR 420 million). Based on the available information on the response of regional
governments to the Ministry of Finance's call for spending cuts (through
acuerdos de no
disponibilidad)
and the degree of adherence to the new healthcare and pharmaceutical
spending rule, the updated Commission 2016 spring forecast incorporates a deficit-reducing
impact of about 0.2% of GDP from these savings mostly driven by the central government,
which are not expected to remain in place in 2017. This is around 0.1% of GDP lower than in
spring.
The updated Commission 2016 spring forecast projects the general government deficit
to narrow further to 3.3% of GDP in 2017.
It is also 0.2% of GDP higher than in the spring
forecast, reflecting the worse-than-expected starting position and the fact that the savings
measures taken in response to the March 2016 Commission Recommendation are not
considered to be rolled over to next year. The improvement of the deficit relative to 2016 is
again mainly due to the cyclical recovery and the continued decline in interest expenditure.
Together with the impact of the 2013 local administration reform and the fact that the
repayment of the foregone 2012 Christmas bonus is fading out, expenditure growth is
expected to be reined in.
The updated Commission 2016 spring forecast projects the general government deficit
to narrow further to 2.7% of GDP in 2018.
The improvement of the deficit relative to 2017
is again mainly due to the cyclical recovery and the continued decline in interest expenditure
and the fact that social transfers continue to grow at a slower pace than nominal GDP.
In its reasoned request of 13 July, the Spanish government announced its commitment
to put in place further deficit-reducing measures.
On the revenue side, amendments to the
corporate income tax law, to be adopted as soon as a new government is formed, would allow
making up for the loss in revenues expected for 2016 following the changes made to the
regulation of instalment payments (pagos
fraccionados)
of the corporate income tax, so as to
ensure that corporate income tax revenues in 2016 reach the level expected in the 2016
Stability Programme. On the expenditure side, the advancement of the date of closure of the
central government's fiscal year, adopted on 14 July, can help contain expenditure
developments in the second half of 2016.
6
The updated spring forecast does not include
savings from these measures, due to uncertainties surrounding their final specification (in the
former) and their estimated impact (in the latter). These measures are subject to considerable
implementation risks, in particular with respect to the timely adoption by Parliament of
5
The reduction in corporate income tax instalment payments in 2016 create a permanent delay in the payment of
taxes, but do not change in the tax rate or tax base, so in a new steady state (starting in 2017) they would not
affect revenue from corporate income taxes.
6
See Ministerial Decision HAP/1169/2016, of 14 July at
https://www.boe.es/boe/dias/2016/07/16/pdfs/BOE-A-
2016-6843.pdf
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required changes to the corporate income tax law and whether they will be sufficient to offset
the expected temporary shortfall in corporate income tax revenues in 2016.
Lastly, according to the updated Commission 2016 spring forecast, the debt ratio is expected
to peak at 100.6% of GDP in 2017 before retreating marginally in 2018, thus exceeding the
Treaty reference value in all years.
Table 2: Composition of budgetary adjustment
2015
(% of GDP)
Outturn
38,2
11,7
10,1
12,2
4,2
43,3
40,3
11,0
5,2
18,4
1,2
2,5
2,1
3,1
-5,1
-2,0
-0,2
-4,9
-4,0
-2,9
-2,7
Spring forecast
38,2
11,9
9,9
12,2
4,1
42,1
39,2
10,7
4,9
18,0
1,1
2,3
2,3
2,9
-3,9
-1,1
0,0
-3,9
-1,5
-3,1
-3,1
2016
Updated spring
forecast
37,5
11,9
9,2
12,2
42,1
39,3
10,8
4,9
18,0
1,1
2,2
2,3
2,8
-4,6
-1,8
-0,6
-4,0
-1,7
-3,6
-3,1
Spring forecast
38,3
12,0
10,1
12,1
4,1
41,3
38,7
10,3
5,1
17,6
1,1
2,3
2,2
2,7
-3,1
-0,4
0,0
-3,1
0,3
-3,2
-3,2
2017
Updated spring
forecast
38,2
11,9
9,9
12,1
4,2
41,5
38,9
10,5
5,0
17,7
1,1
2,3
2,3
2,6
-3,3
-0,7
0,0
-3,3
-0,2
-3,2
-3,2
2018
Updated spring
forecast
38,2
11,9
10,1
12,0
4,2
40,9
38,4
10,4
4,9
17,5
1,1
2,3
2,3
2,5
-2,7
-0,2
0,0
-2,7
0,9
-3,2
-3,2
Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure
of which:
Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap (*)
Cyclically-adjusted balance
Structural balance (SB)
(*) % of potential GDP
Source: Updated Commission 2016 spring forecast
4.
P
ROPOSED NEW FISCAL ADJUSTMENT PATH
Table 3 summarises the main elements from the updated Commission 2016 spring forecast
that underpin the new adjustment path.
Table 3: Forecast of key macroeconomic and budgetary variables under the baseline
scenario
Real GDP growth
Output gap
General government balance
Structural balance
Change in structural balance
Source: Updated Commission 2016 spring forecast
%
%
%GDP
%GDP
pps
2015
3,2%
-4,0%
-5,1%
-2,7%
-0,9%
2016
2,9%
-1,7%
-4,6%
-3,1%
-0,4%
2017
2,3%
-0,2%
-3,3%
-3,2%
-0,1%
2018
2,1%
0,9%
-2,7%
-3,2%
0,0%
The proposed deadline for correcting the excessive deficit situation notably takes into
account the economic conditions together with other relevant factors.
Based on the
baseline scenario outlined above, the second-round effects of the additional consolidation
efforts required to bring an end to the excessive deficit situation are assessed. Moreover, the
design of the new adjustment path for Spain takes account of the fact that the Council
decision to give notice is adopted in the second half of the year, which amplifies the fiscal
effort it would take to achieve a given annual improvement of the structural balance. Finally,
the baseline scenario for the new adjustment path starts with a deterioration of 0.4% of GDP
of the structural deficit in 2016, which is at least in part the result of the inflation turning out
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lower than projected in the scenario underpinning the 2016 budget – an event that is largely
outside the control of the government.
Against this background, it is proposed not to request additional consolidation measures
in 2016.
This leads to a headline target for 2016 of 4.6% of GDP, as in the baseline scenario.
It implies a 0.4% of GDP deterioration of the structural balance, also as in the baseline
scenario.
An extension of the deadline by two years could be considered appropriate.
Considering
that no further structural measures should be requested in 2016, granting Spain one additional
year for the correction of its excessive deficit, which is the rule according to Council
Regulation (EC) No 1467/97, would require an annual improvement of the structural balance
in 2017 of 0.8% of GDP, requiring measures of 0.9% of GDP. Therefore, it seems adequate to
extend the deadline for Spain to bring an end to its excessive deficit situation by two years.
In 2017, in view of the strong cyclical tailwind, the benchmark improvement of the
structural balance of at least 0.5% of GDP would bring the general government deficit
to 3.1% of GDP.
This requires additional measures of 0.5% of GDP compared to those
already included in the updated Commission 2016 spring forecast.
In 2018, a further improvement of the structural balance by 0.5% of GDP would bring
the general government deficit to 2.2% of GDP.
This requires additional measures of 0.5%
of GDP compared to those already included in the updated Commission 2016 spring forecast.
These targets ensure a sufficient margin towards the 3% reference value, enabling Spain to
put an end to the situation of an excessive deficit in a durable manner.
Extending to 2017 the 0.4% of GDP expenditure savings at central and regional
government level planned in the 2016 Stability Programme, could, if fully implemented,
contribute to the requested effort by 0.4% of GDP.
7
These savings would need to be
complemented with other permanent measures, such as the reduction of the number and scope
of tax expenditures, in particular the reduced VAT rates, to achieve the required structural
effort. Data show that there is scope for such policy action: the level of indirect taxation and
the implicit rate on consumption in Spain remain among the lowest in the EU, at 11.6 % of
GDP and 15.2% in 2014, respectively. Moreover, in 2013 (latest available figure), Spain
recorded the largest VAT
8
policy gap in the EU (at 53.9 % compared to the EU average of
47.2 %).
Table 4: Forecast of key macroeconomic and budgetary variables under the EDP
scenario.
2015
Additional permanent measures
Real GDP growth
Output gap
General government balance
Structural balance
Change in structural balance
Source: Updated Commission 2016 spring forecast
% GDP
%
%
%GDP
%GDP
pps
3,2%
-4,0%
-5,1%
-2,7%
-0,9%
2016
0,0%
2,9%
-1,7%
-4,6%
-3,1%
-0,4%
2017
0,5%
1,7%
-0,8%
-3,1%
-2,6%
0,5%
2018
0,5%
1,5%
-0,1%
-2,2%
-2,1%
0,5%
7
To note that half of the 0.4% of GDP savings reported in the 2016 Stability Programme were already included
in the updated Commission 2016 spring forecast. However, these savings were not projected to remain in
place in 2017.
8
The VAT policy gap is an indicator of the VAT revenue theoretically foregone by applying non-standard rates
to some goods and services, expressed as a share of revenues that would be collected if everything was taxed at
the standard rate
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5.
Fiscal framework
On 12 July 2016, in the context of the 2016 European Semester, the Council recommended
Spain to implement at all government levels the tools set out in its fiscal framework law.
Spain’s fiscal framework does include relevant tools to prevent and correct deviations
from fiscal targets.
For example, the 2012 Stability Law introduces an early-warning
mechanism so that early corrective action can be taken in the event of an identified risk of
non-compliance with deficit, public debt or spending rule targets. If no action is taken, the law
foresees corrective and enforcement measures. The experience of the past few years shows
that these tools could have been enforced to a greater extent, especially at regional level
9
.
Following the March 2016 Commission Recommendation, the Spanish government has
enforced some of the corrective provisions in the Stability Law
10
that have so far not been
implemented, such as the requirement for non-compliant regional governments to adopt
expenditure cuts in budget appropriations. Looking forward, greater automaticity in the
application of the preventive and corrective mechanisms provided for in Spain's Stability Law
at all government levels could be conducive to a timely and durable correction of Spain's
excessive deficit.
Spain’s fiscal framework also includes tools to ensure sustainable expenditure
developments.
Specifically, it includes an expenditure rule, whereby the variation in the
eligible expenditure of the central, regional and local governments should not exceed the
reference rate of medium-term growth of Spain's GDP (set at 1.8% for 2016 by the Ministry
of Economy). As the economy is growing above this rate, compliance with this rule can help
underpin consolidation by, among other things, avoiding that windfalls are entirely spent.
Moreover, the contribution of the Stability Law's spending rule to the sustainability of public
finances could be enhanced by clarifying the coverage and definition of the spending
categories needed for its computation and, contrary to its implementation in 2016, explicitly
calling on the non-compliant public administrations to make up for spending slippages in the
year following their occurrence.
The 2016 Country Specific Recommendations also call on Spain to enhance control
mechanisms for public procurement and coordination of procurement policies across
government levels.
This is against the backdrop of a relatively high number of presumed
breaches of EU public procurement legislation brought to the Commission’s attention in
recent years. Evidence shows that there are disparities in the implementation of public
procurement across contracting authorities and entities, and that insufficient ex-ante and ex-
post control mechanisms hinder the correct and uniform application of public procurement
legislation. Spain stands out for a low publication rate of contract notices compared with other
Member States. They represented 1.8 % of GDP in 2014, compared with 4.4 % in the EU,
which ranks Spain 23rd out of 28 countries. Similarly, the publication rate in terms of
percentage of total expenditure on procurement is only 13.2% compared to an EU average of
26.2%, Spain ranking 22 out of 28 countries. Spain also stands out for a relatively high use of
the negotiated procedure without prior publication (10 % of all award notices vs. 5 % in the
European Economic Area, ranking 22 out of 31 countries). This translates into limited
competition from undertakings from other EU countries and frequently, into direct awards,
with implications in terms of higher general government expenditure. The limited use of
centralised or joint procurement instruments prevents efficiency gains which would contribute
to fiscal savings. The absence of an independent body in charge of ensuring efficiency and
9
See section 3.5. on Public Administration, Fiscal Frameworks and Taxation of the 2016 Country Report for
Spain at
http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_spain_en.pdf
10
E.g., Art. 25.1a) of Spain's Stability Law.
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legal compliance in public procurement throughout the country hampers the proper
implementation of procurement rules and may create opportunities for wrongdoings, both of
which have negative impacts on the situation of Spain's public finances.
6.
C
ONCLUSIONS
On 12 July 2016, in compliance with Article 126(8) TFEU and following a Commission
reccomendation, the Council issued a decision establishing that no effective action had been
taken by Spain in response to the 2013 Council recommendation. Hence, as prescribed by
Article 126(9), the Council upon Commission reccomendation, shall give notice to the
country to correct its excessive deficit, indicating the adjustment path.
On the basis of the updated Commission 2016 spring forecast, and taking into account that the
Council decision to give notice is adopted in the second half of the year, which amplifies the
fiscal effort it would take to achieve a given annual improvement of the structural balance, a
correction path that envisages no additional measures in 2016 and 0.5% of GDP additional
corrective measures in both 2016 and 2017, on top of those already included in the updated
2016 spring forecast, would appear justified. This would lead to a headline deficit of 4.6%,
3.1% and 2.2% of GDP in 2016, 2017 and 2018, respectively and would imply, in turn, a
deterioration of the structural adjustment by 0.4% of GDP in 2016 and an improvement by
0.5% of GDP both in 2017 and 2018.
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Annex: forecast of key variables for the computation of the fiscal effort under the
baseline scenario
2016
Structural expenditure (% of potential GDP)
41.08
0.45
411.13
-8.04
3.40
-1.73
-2.75
469.48
31.47
4542.96
2017
41.37
0.72
434.88
5.53
3.63
-0.23
5.52
480.62
30.52
4136.80
2018
41.39
0.90
450.87
0.19
3.56
0.92
0.19
490.70
29.61
3765.64
Enters top-down
α
Potential GDP growth (%)
Current revenue (national currency)
Discretionary measures wih impact on current revenue (national currency)
β
Nominal GDP growth (%)
p.m Output gap (% of Pot. Output)
Enters bottom-
up
Discretionary measures wih impact on total revenue net of one-offs and other temporary
measures (national currency)
Total expenditure net of one-offs and other temporary measures (national currency)
Interest expenditure (national currency)
Total unemployment
Source: Commission calculations based on updated spring 2016 forecast
EN
10
EN