The European Commission asked Madrid to re-submit its budget on Monday and work harder to bring down unemployment and debt, in a blow to Prime Minister Mariano Rajoy’s campaign to get reelected on the back of his economic policy achievements.
Spain’s government, which is trying to work its way off the EU’s economics watch-list, will have to submit fresh numbers for Brussels’ approval “as soon as possible,” according to an opinion released by the Commission.
More than anything, Spain needs “to further reduce still very high unemployment and high levels of private and public debt,” Commission Vice-President Valdis Dombrovskis told reporters.
By submitting his 2016 budget for Brussels’ approval ahead of schedule, Rajoy had hoped to be able to implement it before the Spanish parliament dissolves for national elections on December 20. He faces challenges from the main opposition Socialists and two upstart political movements — the center-right Ciudadanos and the anti-austerity, leftist group Podemos.
That plan has now backfired, drawing even more attention to persistent structural weaknesses in Spain’s economy. Socialist leader Pedro Sanchez has attacked Rajoy’s budget, saying his numbers don’t add up.
Madrid has been subject to tightened economic surveillance from Brussels, known as the “corrective arm,” since 2009 and has promised to rein in its public deficit by 2016. However, the budget submitted by Madrid used projections as a basis for spending targets that didn’t match up with the Commission’s own assessment.
According to an agreement reached in 2013, Spain is supposed to continue scaling down its national budget, expressed as a percentage of gross domestic product, each year: to 4.2 percent of GDP in 2015 and 2.8 percent of GDP in 2016. The Commission sees a risk that it could miss those targets.
“At the moment we think [the gap] is 0.3 points,” said Pierre Moscovici, the EU’s economics commissioner.
Spain’s budget also didn’t include breakdowns of spending and budget measures by region, another issue that raised a flag in the EU’s headquarters.