- The Independent Authority for Fiscal Responsibility (AIReF) issued five new recommendations in the fourth quarter of 2024, aimed at updating the national fiscal framework and the expenditure rule
- According to the Law, General Government authorities are obliged to follow AIReF’s recommendations or explain the reasons for deviating from them
- The Government undertook to carry out realistic and credible medium-term fiscal planning within the framework of the transposition of European Directive 2024/1265 on Member States’ budgetary frameworks
- AIReF updates the interactive tool that facilitates the monitoring of the recommendations with information for the fourth quarter
The Independent Authority for Fiscal Responsibility (AIReF) published the monitoring of the recommendations issued to the General Government (GG) in the fourth quarter of 2024 on its website today, a period in which it made five new recommendations aimed at updating the national fiscal framework and the expenditure rule, following the entry into force of the new fiscal rules on April 30th. In its responses, the Government undertook to comply with AIReF’s recommendation for realistic and credible medium-term fiscal planning.
AIReF issues recommendations in its reports that are governed by the “comply or explain” principle, the main tool it has to satisfy its mandate. This principle establishes that GG authorities are obliged to follow the recommendations or explain the reasons for deviating from them. In the fourth quarter of 2024, AIReF issued five new recommendations. Taking into account that the same recommendation may be addressed to more than one GG authority, six recommendations were issued in total: four to the Ministry of Finance (MINHAC) and two to Local Governments.
In order to update the national fiscal framework, AIReF recommended taking advantage of the transposition of the National Fiscal Frameworks Directive to design a credible and effective medium-term budgetary framework ensuring the coherence, consistency and effectiveness of the national fiscal framework. The Ministry of Finance undertook to ensure that multi-year fiscal planning is based on realistic macroeconomic and budgetary forecasts that are as up to date as possible, under the principles of prudence, reliability, completeness and accuracy of its projections. AIReF view this commitment positively and recalls that in its Opinion on fiscal transparency in General Government authorities, published on April 15th, 2021, and in its Opinion on the budgetary procedure, published on November 3rd, 2023, potential areas for improvement were identified.
AIReF also recommended that the Council of Ministers should approve public debt targets by sub-sector for the period 2025-2027. In its response, MINHAC stated that this recommendation has been complied with and reported that the Council of Ministers Resolution of September 10th included these debt targets by sub-sector, as can be seen in the Parliamentary Gazette of September 20th, 2024.
To update the expenditure rule, AIReF recommended that MINHAC should push for the amendment of Article 12 of the Law on Budgetary Stability so that the definition of eligible expenditure in the national expenditure rule coincides with that of the European expenditure rule. In the meantime, the criteria for the practical application of the national expenditure rule should be brought as close as possible to those of the European expenditure rule. To this end, the General State Comptroller (IGAE) should draw up a new unified guide to the expenditure rule for all GG authorities.
Regarding the first recommendation, MINHAC acknowledged the need to analyse national procedures and regulations with a view to their maximum alignment with the new EU rules. In this context, it pointed out that it is taking advantage of the guidelines contained in the European regulations to report on this process and, if necessary, propose amendments to the Law. It also noted that the calculation of the expenditure rule already differed from the previous equivalent parameter in European legislation and that, although it is not fully aligned with the new European framework, it has numerous points of convergence that make them compatible. With regard to the second recommendation, MINHAC replied that it does not consider it prudent to draw up a guide in the terms recommended unless there are amendments to national legislation.
According to AIReF, there are no reasons to justify the differences in the calculation of the national and European expenditure rule. Although there are points in common between the two rules, the existence of these differences does not guarantee their compatibility. It thus considers that MINHAC should modify the definition of the expenditure rule to bring it into line with the European rule and, until this happens, approximate its calculation criteria.
Lastly, in the Report on the main lines for 2025, AIReF recommended that the City Councils of Bilbao and L’Hospitalet de Llobregat should monitor their budgetary execution, adopting the measures they deem appropriate to correct the growth in eligible expenditure for the purposes of the expenditure rule and thus avoid the structural deterioration of their accounts in the medium and long term. While L’Hospitalet de Llobregat undertakes to comply with this recommendation, the City Council of Bilbao explains that its non-compliance with the expenditure rule is due to the remodelling works of the Bilbao Fine Arts Museum and the rate of execution of these works and their co-financing by the Provincial Council and the Autonomous Region of the Basque Country.
