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An unsustainable expense

The Government has presented the bill for the General State Budgets. Its base is unsustainable for two reasons: the first, because the macroeconomic picture has not lasted even twenty-four hours, since both AIReF, and especially the Bank of Spain, such as BBVA Research, have published forecasts that dismantle those of the Government. Thus, while the Executive expects growth of 2.1% for 2023, AIReF estimates 1.5%; the Bank of Spain 1.4%; and BBVA Research forecasts growth of 1%. All this, under many risks that may materialize, which would worsen said forecasts. On the other hand, it is also unsustainable due to the volume of expenditure reached by the Government, with a non-financial spending ceiling of almost 200,000 million euros. That level of spending is clearly unsustainable.

The Government, in its electoral eagerness, does not control spending, but rather increases it. It anticipates with indebtedness the part of the European funds that have not arrived, and that will not arrive if the established conditions are not met. It seems somewhat unlikely, but it could happen, especially if it is linked to pension reform. In that case, what is now a temporary debt would become permanent due to a greater deficit that said expense would have to cover. The cost of chapter I also rises by 6.6%, both due to the increase in places and the 3.5% salary increase. Additionally, pensions propose to revalue them to 8.5% (pending the definitive average data of the CPI from November to November); This alone will have an impact of greater spending of 15,000 million euros.

Also, distributes checks and grants of all kinds: universal income of 100 euros per month per child to raise them, whether they work or not; more funds in dependency; or extension of the free Cercanías y Media Distancia throughout 2023, to give several examples.

In this way, with such an important spending pressure, which will end up being greater, for sure; and with a forecast of growth so far from reality, that it will lower the collection, since the increase in it derived from inflation is also unsustainable over time, and with these forecasts it will not be compensated by the collection linked to real activity; deficit and debt data may worsen markedly.

The Government thus carries out a crazy spending policywhile scaring away investment and reducing the possibilities of growth and employment in the economy, worsening its structure.

You can’t always try to solve everything with more spending, because there will come a time when it won’t be possible to finance it. Instead of spending more and patching things up, the government should work on reforms that allow the economy to sustain itself, not artificially, because they will leave a break important in it in a very difficult environment.

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