The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, took part today in an event organised by the Cercle d’Economia entitled “The challenge of governing without budgets: can we afford it?”. In a conversation with the President of the Cercle, Teresa García-Milà, she addressed the institutional and economic implications of repeated budget extensions, both at the national and European levels.
The President highlighted that budget extensions are a best practice designed to avoid administrative paralysis, but they should only be used in exceptional circumstances. In her opinion, the recurrence of these situations prevents the proper exercise of accountability and oversight to which any government must be subject to ensure institutional and democratic quality. Furthermore, it should not exempt governments from their constitutional obligation to present a draft budget, which allows the broad strokes of the economic policy that governments intend to pursue to be made public.
Cristina Herrero considered that this lack of sensitivity towards the institutional importance of the budget is also taking hold in the European Union, which is preparing a reform of the regulations to exempt countries from presenting their draft budgetary plans – which until now had to be submitted by October 15th – if they are not in a position to bring the budget before their national parliament. This would regulate the Spanish exception, since Spain was the only country that did not submit a budgetary plan in 2024.
According to Cristina Herrero, these practices also have administrative implications, such as the lack of a clear and predictable framework for other General Government authorities, which is key in countries as decentralised as Spain, and greater difficulties in carrying out medium-term budgetary planning, a fundamental element following the reform of the European fiscal framework. She also stated that budgets are an essential tool for anchoring expectations, especially in the current context of uncertainty, in which Spain continues to have debt of around 100% of GDP.
AIReF, a key role
Regarding the role of AIReF in this context of institutional uncertainty, the President emphasised that the institution, in accordance with its legal mandate, ensures budgetary sustainability and supervises compliance with the national fiscal framework, even in the absence of a budget. In fact, in its latest report, AIReF recommended that the Ministry of Finance begin the budget preparation process as soon as possible.
She also highlighted AIReF’s contribution in providing medium-term economic and budgetary analyses, even in times of uncertainty, which serve as a reference for agents, along with the Autonomous Regions and Local Governments. AIReF also makes long-term projections to analyse the sustainability of the General Government further. In a situation such as the current one, without a budget, the fiscal institution provides transparency and quality, helping to focus the debate; it reports to the public objectively and independently, enabling citizens to form their own opinions; it makes recommendations that force governments to provide explanations; and it presents data that can reduce uncertainty.
Impact of the extension
Cristina Herrero also analysed the budgetary impact of the extension of the 2023 Budget, in force for the second consecutive year. She pointed out that, although the extension could have a restrictive effect on expenditure in 2024, behaviour is different in 2025, pointing to a more intensive use of the flexibility mechanisms provided for in the General Budgetary Law. In her view, this greater reliance on exceptional instruments reflects the Budget’s increasing non-compliance with the economic reality as time passes without new accounts being approved. In this way, the Budget ceases to be a guide for economic policy and becomes a framework that is continuously corrected, reducing transparency and planning capacity.
She also highlighted that, despite the restrictive nature of the budget extension, eligible expenditure for the purposes of the expenditure rule grew by 6.8% in 2024, above the 2.6% set by the reference rate. For 2025, AIReF forecasts growth of 6.5%, compared with the 3.2% commitment.
She specified that the Spanish economy has benefited from factors that have mitigated some of these effects, such as dynamic public revenue, driven by economic growth and the withdrawal of extraordinary measures, as well as the Recovery, Transformation and Resilience Plan (RTRP), which has made it possible to maintain a high level of investment. However, she warned that these European resources are temporary and that, once they are exhausted, it will be necessary to define a clear medium-term fiscal strategy.
AIReF forecasts
Lastly, the President reviewed AIReF’s most recent fiscal forecasts, which predict a public deficit of 2.6% of GDP in 2025. She also announced that the institution will revise its macroeconomic forecasts upwards in its next report. Despite the improvement in the overall situation, she warned of growth in primary expenditure net of discretionary revenue measures, a key variable in supervision following the entry into force of the new fiscal framework, which will require adjustments to be made in 2027 and 2028 to comply with the commitment made to the EU authorities. And this, in her words, involves engaging all General Government authorities and a sound institutional framework that clearly defines the coordination system, the responsibilities of each General Government authority and the implications of any possible deviations.
