Government raises growth forecast for 2016 to 2.9% and anticipates creation of 900,000 jobs before end of 2017

Moncloa Palace, Madrid

The Council of Ministers updated the macro-economic chart for 2016-2017 that serves as the basis for the preparation of the General State Budget. This revision improves the growth and employment figures contained in the Stability Programme presented to Brussels back in April.

The acting Vice-President of the Government, Soraya Sáenz de Santamaría, announced that "the Spanish economy will post four years of back-to-back economic growth and job creation after suffering the worst recession in our recent history". She also pointed out that the government's forecasts are "prudent" and will allow progress to be made towards achieving the goal of 20 million people in work by 2019.

Along the same lines, the acting Minister for Economic Affairs and Competitiveness, Luis de Guindos, described the forecast as "conservative" and the employment figures as "perfectly credible", in line with the forecasts made by the European Commission.

Luis de Guindos explained that the government has revised the growth forecast upwards by two tenths of a point, from 2.7% to 2.9%, while the estimate for 2017 has been reduced by one tenth to 2.3%.

The government also raised the job creation forecast in national accounting terms [full-time equivalent jobs as an annual average] to 2.7% in 2016, two tenths higher than the estimate in April, while the forecast for job creation in 2017 remains at 2.2%.

In terms of the Labour Force Survey (Spanish acronym: EPA), the minister highlighted that it is estimated that 900,000 new jobs will be created over the next two years, that is, an average of 450,000 jobs each year. Unemployment will fall by a little over 1 million people over these two years and the unemployment rate will fall from 20.9% of the recorded active population in 2015 to 16.6% by the end of 2017.

This means that the unemployment rate will have fallen by 4.3 points in two years to stand at the lowest level since the fourth quarter of 2008.

The Minister for Economic Affairs highlighted that the Spanish economy is competitive and now has a healthy banking sector and is in a position to offer credit. He also stressed that the improved growth in 2016 is taking place with a surplus in the current account of the balance of payments which stands at 1.7% and may even exceed 2% of Gross Domestic Product (GDP).

Spain is growing at double the Eurozone rate

Luis de Guindos reviewed the latest economic data which, in his opinion, show "significant growth in the Spanish economy, double the Eurozone average, with noteworthy job creation, negative inflation and an unprecedented surplus in the current account of the balance of payments in our recent history".

The minister pointed out that, according to the estimates from the National Institute of Statistics for the second quarter, year-on-year growth in the economy stands at 3.2%, while the Eurozone average is 1.6%, in other words, "exactly double". In this regard, he also pointed out that Spain's contribution to growth in the Eurozone amounts to 20% while its weighting stands at some 11%.

In terms of inflation, Luis de Guindos highlighted that this stands at -0.6% in July, and hence will post negative figures for the third straight year. "We are going to have a negative average rate of inflation. That is good news from the perspective of the competitiveness of the Spanish economy and the increase in disposable income of salaried workers, pensioners and all those that rely on a fixed income, which will increase in terms of purchasing power as a result of the drop in inflation".

The minister also referred to the Bank of Spain figures on the development of the current account of the balance of payments. He considers that the Spanish economy can generate a surplus of close on 2% of GDP this year, in other words, around 20 billion euros. "This would be a first in Spain's history, and the fourth straight year of a surplus in the current account".

Luis de Guindos also highlighted that the flow of credit, both to families and to companies, continues to grow.

Enforcement petition before Constitutional Court

The Council of Ministers agreed to file a ruling enforcement petition before the Constitutional Court against the resolution adopted by the Regional Parliament of Catalonia on 27 July, approving the conclusions of the Constituent Process Study Commission.

The Vice-President of the Government underlined that this resolution "clearly violates the constitutional order and is in flagrant breach of the rule of law in that it flaunts the rulings handed down by the Constitutional Court". "This is a breach of our Constitution as well as of the rulings of the body that interprets them. It means placing an institution and its members above the democratic will of the people of our nation as a whole", she added.

The government will request the Constitutional Court to declare the resolution of the Regional Parliament of Catalonia null and void and suspend it immediately, specified Soraya Sáenz de Santamaría. Moreover, the petition asks for the Speaker of the Regional Parliament, Carmen Forcadell, and the members of the Board and its Secretary-General "to abstain from performing any action that aims to comply with this resolution", or any other related initiative, "warning them of the criminal liability that they may incur".

The government also requests the Constitutional Court to impose "an express ban on them from calling the parliamentary bodies to debate or vote on any initiative that may directly or indirectly lead to the resolution challenged from being complied with". It also requests that the President of the Regional Government of Catalonia, Carles Puigdemont, and the members of its Governing Council should be banned from "filing any legislative proposal, or adopting any regulation or pushing through any initiative that legally or materially supports the fulfilment of the resolution challenged, warning them of the liabilities, including of a criminal nature, that they may incur".

The Vice-President of the Government further pointed out that they should be warned that, if they breach these rules, the measures provided for in Article 92.4 of the Constitutional Law on the Constitutional Court will be applied, involving the imposition of a coercive fine of between 3,000 and 30,000 euros, which may be imposed repeatedly until such time as the order is comprehensively complied with; a suspension of their duties during such time as is necessary to ensure the procedures of this court are observed and the recording of the testimony of individuals to enforce such criminal liability that may correspond to it.

Soraya Sáenz de Santamaría confirmed that the acting President of the Government, Mariano Rajoy, has spoken with the leaders of the PSOE, Ciudadanos and Podemos to explain to them the content of the petition in line with the report from the State's Attorney's Office. She also stressed that the government "will defend the rights of the Spanish people under the rule of law on a proportional and rational basis". "We said that we were not going to allow them to get away with anything and that is what we are doing", she stressed.

Other agreements

The government approved a Royal Decree regulating the final evaluations of Obligatory Secondary Education and the Spanish Baccalaureate. The Vice-President of the Government claimed that "this guarantees legal certainty and equal opportunities for students throughout the country who, as from the next academic year, will take the exams under the new curriculum established in the Constitutional Law on Improving the Quality of Education (Spanish acronym: LOMCE) both to obtain the Spanish Baccalaureate title and achieve a place at university.

On another note, the government amended the law on special night shift work to adapt it to EU law. It is established that night workers who perform tasks with special risks or under pressure cannot work for more than eight hours on a daily basis. The rule provides for two exceptions: when their work is necessary to prevent or repair incidents or other cases of urgent damage, and when there are irregularities in organising shifts for reasons that are not attributable to the company.

The government also agreed to modify the limits on taking on spending commitments charged to future financial years in order to offset the interest on loans to shipbuilders to build vessels. Soraya Sáenz de Santamaría recalled that this sector is being backed with the aim of stimulating the contracts to build vessels in our shipyards and to improve competitiveness through aid to R&D+i projects.

Furthermore, the Council of Ministers increased the maximum limit on spending by 15 million euros assigned to the agreement signed by the State Agricultural Insurance Institution (Spanish acronym: ENESA) and the Spanish Insurance Institution for Combined Agricultural Insurance (Spanish acronym: AGROSEGURO).

Current affairs

When asked about whether it could be unconstitutional for Mariano Rajoy not to stand for a vote of investiture after becoming the candidate in the event of not receiving sufficient support to be appointed as President of the Government , the Vice-President of the Government said that this is an "eminently political" issue and stressed that the President of the Government "is exercising his responsibility, which is to comply with the commission from the King to try and form a government in order to "return the country to democratic normality".

She also asked all the parliamentary groups "to make an effort to negotiate as generously as possible", to "compare ideas" and see if "we can reach an agreement" because "it is time to think about Spain and how to govern our country". She added that "we have asked out citizens on two occasions and we cannot burden them a third time with a responsibility that falls to us". To tackle this, "I can only see one option, and that is to negotiate", she concluded.