Government presents Draft Law on Budgetary Stability

The Minister for the Treasury and Public Administration Services explained the main aspects of the future law:

• Public debt is introduced as a criterion of budgetary sustainability and may not exceed 60% of GDP
• All public authorities must show a balance or a surplus and may not incur a structural deficit, except in exceptional situations.
• In order to set stability and public debt objectives, the European Union recommendations on the Stability Programme shall be taken into account.
• All public authorities must approve a ceiling on expenditure in accordance with the stability objective and with the rules on expenses.
• Public authority expenditure may not exceed the growth rate of GDP, in accordance with European legislation.
• Servicing debt and the capital of public debt are established as an absolute priority over any other expense.
• Any non-compliance with these objectives will require the submission of a one-year economic-financial plan.
• In the event of non-compliance with the plan, the public authority shall automatically approve the non-availability of loans to guarantee compliance with the objective established.
• A deficit in exceptional circumstances will require a re-balancing plan to deal with the consequences deriving from such a situation.
• Compliance with these objectives shall be taken into account when authorising debt issues, granting subsidies and signing agreement with the public authorities.
• The sanctions approved by the European Union are transposed into Spanish legislation.
• The sanctions imposed by the EU on Spain in matters of stability, as the case may be, shall be assumed by the corresponding public authority. This public authority must establish a deposit to reimburse 0.2% of its nominal GDP, which may in turn become a fine if the breach exists after a term of six months. After nine months, the Ministry for the Treasury and Public Administration Services may send a delegation to assess the economic-budgetary situation of the public authority in breach.
• The Law strengthens the principle of transparency since each public authority must establish equivalence between its budget and national accounting.

Cristóbal Montoro also specified that there will be a new feature consisting of a transitional period up to 2020 to comply with limits on public debt.

The minister pointed out that public debt will be reduced as the national economy grows and when it reaches a growth rate of 2% or generates jobs the weighting of the debt will be reduced by two percentage points of the GDP.

He also indicated that the structural deficit of the public authorities should reduce, as an annual average, 0.8% of GDP. In 2012, the Lower House of Parliament will assess if an economic recession exists and, as the case may be, approve a re-balancing plan. Both debt and the public deficit will be reviewed in 2015 and 2018.

The Minister for Industry, Energy and Tourism, José Manuel Soria, took stock of the  Royal Decree Law approved by the Council of Ministers which invokes the suspension of procedures for the pre-assignation of remuneration and the abolition of economic incentives for new installations for the production of electricity through co-generation, sources of renewable energies and waste.

The "unequivocal" objective of this law is to reduce the public deficit, added José Manuel Soria. The complex economic and financial situation, together with the situation of the electricity system makes the abolition of incentives for the construction of these installations advisable, at least temporarily, while a reform of the electricity system is implemented which will avoid generating a tariff deficit.

The tariff deficit accumulated at the end of 2011 is around 24 billion euros and the most significant problem, in the words of the minister, is its rate of growth. "If we don't do something" the annual growth rate will be between 3 and 4 billion euros. If this persists, the energy problem could also become a financial problem. The Government is not going to remain "passive" in the face of this situation, stated the minister, and hence the rationale for approving this Royal Decree Law.

However, José Manuel Soria underlined that Spain has a potential capacity for energy production of 106,925 megawatts while the optimum demand is 38,297 megawatts, or "not even half". In other words, we do not have a production, generation or installed capacity problem, but rather a tariff deficit, explained the minister.

• Approval of the Royal Decree appointing Eduardo Torres-Duce Lifante as the Director of Public Prosecutions.
• Approval of the Royal Decree appointing Víctor García de la Concha as the Director of the Cervantes Institute.
• Authorisation of various operations regarding the indebtedness of autonomous regions.
• Agreement to maintain the amount of the base price of protected housing projects.
• Support from the Government of Spain for the candidature of Madrid for the 2020 Olympic Games and Paralympics.
• Approval of the organic structure of the Ministry of the Treasury and Public Administration Services, with a reduction of 14 sub-directorates.
• Approval of the structure of the Ministry of Education, Culture and Sport, with a reduction of 13 sub-directorates.

During her appearance at the press briefing following the Council of Ministers, the Vice-President of the Government expressed the solidarity of the Government with the families of the national police officers who disappeared while on service in La Coruña. Soraya Sáenz de Santamaría declared that the President of the Government, Mariano Rajoy, was informed of the tragic event on Friday morning and that the Ministers for Public Works and Home Affairs were on their way to the area. The Government will spare no effort in the search and rescue operations.

Moving on, the Vice-President expressed her satisfaction at the agreement reached between the employers' association and trade unions in the so-called "income agreements". In this respect, she highlighted that "it is the first time that growth in salaries is factored into economic growth", and that this will be a help "when meeting the objectives of job creation".

When asked about the unemployment figures in the Active Population Survey, Soraya Sáenz de Santamaría said that the "figures are negative" which will move the Government to work more intensively and to speed up the reforms.

On another note, the Vice-President of the Government indicated that reappointing the Constitutional Court is urgent and that the Government has been in contact with the PSOE to renew talks. As regards the reform of the General Council of the Judiciary, Soraya Sáenz de Santamaría reiterated that the Government included this in its election manifesto.