- The President of AIReF reviews the evolution and reforms of fiscal supervision in Spain over the last 40 years, highlighting its parallelism with the evolution of the Stability and Growth Pact, with the exception of its latest reform, which is still pending transposition into the national fiscal framework
- She asserts that the latest reform of the Pact changes the approach to supervision and moves towards differentiated, more realistic and credible national fiscal strategies, although the start has been disappointing
- She calls for a legal and practical reform of the national fiscal framework to address this change in approach and overcome national shortcomings, taking into account Spain’s high level of debt and decentralisation
- She stresses that the inconsistencies between the European and national fiscal frameworks have become more evident in 2024, a year in which only the deficit rule operated at the European level, while the national expenditure rule also operated at the national level
- In 2024, neither the Central Government (CG) nor 13 Autonomous Regions (ARs) complied with the national expenditure rule, although only the ARs were required to submit an Economic-Financial Plan (PEF) specifying how they would remedy the non-compliance. All PEFs would require a prior report from AIReF. The regulations require that, in the event of non-compliance, the CG must also submit a PEF, subject to approval by the Congress of Deputies
The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, participated today in the 42nd Economics Seminar organised by the Association of Economic Journalists (APIE) at the Menéndez Pelayo University in Santander, with a presentation focused on the evolution of fiscal supervision and control in Spain over the last 40 years and the current challenges posed by the implementation of the new European fiscal governance. During her presentation, she advocated a thorough reform of the national fiscal framework to overcome inconsistencies with the European framework and taking into account the high level of debt and decentralisation in Spain. In this regard, she stated that the different responses at a European and national level and between sub-sectors to breaches of the rules in 2024 by the State and the ARs are a clear reflection of the inconsistencies between the two frameworks.
Cristina Herrero began by explaining that fiscal sustainability is an essential condition for ensuring social welfare, intergenerational equity and macroeconomic stability. She also pointed out that this condition becomes even more important in the context of a monetary union such as the euro, where fiscal policy is the main tool available to Member States. Throughout her presentation, she reviewed the changes and evolution of fiscal supervision and control in Spain over the last 40 years, as well as the successive reforms made to the Stability and Growth Pact (SGP), which have sought to respond to the limitations revealed by various crises, promoting greater national ownership and strengthening the role of independent fiscal institutions.
In this context, she highlighted the creation of AIReF in 2013, which marked a turning point in the fiscal supervision system in Spain, providing the country with an innovative institution in terms of its functions and institutional configuration. In her words, it is difficult today to understand the national budgetary framework without AIReF, both because of the functions it performs and because of its efforts and initiatives to explain the value of sustainability to society. In this regard, Cristina Herrero announced that AIReF will launch a new section on its website in the coming days aimed at dissemination, with the aim of educating the public about economics. This new space will feature weekly informative publications, a dictionary of concepts, informative tools and a space specifically dedicated to students.
The President reviewed the latest reform of the European fiscal framework approved in 2024, which introduces a new approach based on medium-term national commitments, focused on a single control variable: net primary expenditure excluding discretionary revenue measures. This reform involves a profound change in the way fiscal supervision is understood and strengthens the role of institutions such as AIReF. However, the first Medium-Term Structural-Fiscal Plans (MTPs) have not lived up to expectations. In the case of Spain, the President of AIReF recalled the limitations identified in the institution’s reports, such as the lack of transparency in negotiations with European institutions, the scant participation of Autonomous Regions and Local Governments and other stakeholders, the limitations on macroeconomic and budgetary information, and the fact that the greatest spending constraints are postponed until the end of the period.
Cristina Herrero stressed that AIReF’s no-policy-change projections highlight the importance of meeting the commitments made to revert the upward trend in public debt. To meet these commitments, no additional measures would be necessary in 2026, but they would be needed in 2027 and 2028.
She also stressed the urgency of promoting the third reform of the national fiscal framework to address the change in approach in European supervision and overcome national shortcomings. In her opinion, the inconsistencies between the European and national frameworks and between sub-sectors have become more evident in 2024, a year in which both the CG and the ARs have failed to comply with the European recommendation and the national expenditure rule. At a European level, non-compliance has not led to the opening of any proceedings. However, at a national level, 13 ARs have been required to submit Economic-Financial Plans (PEFs) and the same should also be required of the CG. In this case, in addition to the corresponding report from AIReF, the plan should be approved by the Congress of Deputies.
In this context, Cristina Herrero asserted that the reform of the fiscal framework must include a review of the Organic Law on Budgetary Stability and Financial Sustainability (LOEPSF), but also other actions such as improving transparency, aligning spending rules, coordination between sub-sectors, changes in the system for setting targets and in the application of supervision and control mechanisms, among other things. In addition, a review of the AIReF regulations should be considered in line with the recommendations of the external evaluation carried out by the European Commission in 2024. Among other measures, she pointed to the need to strengthen the role of AIReF in the new fiscal framework, reinforce the evaluation function and make external evaluations mandatory every five years.
Cristina Herrero concluded her speech by stating that the success of the new fiscal governance will not only depend on its European design, but more importantly on its implementation at the national level. In this regard, she stated that fiscal sustainability should not be understood as an imposition, but as a shared responsibility that responds to the general interest of the country and requires the commitment and cooperation of all tiers of government.
