 The new budgetary stability lawPablo Hernández de Cos and Javier Pérez Economic Bulletin, 2013, issue APR, No 02, 13-25 Abstract: In September 2011 it was decided to reinforce the prevailing framework of budgetary rules in Spain with the approval of a constitutional reform. The reform enshrines in the Constitution the obligation for all tiers of general government to adjust their conduct to the principle of budgetary stability. Subsequently, on 27 April 2012, the Organic Law of Budgetary Stability and Financial Sustainability (LEP by its Spanish abbreviation) implementing this constitutional reform was approved, replacing the stability laws in force. The LEP made significant amendments to the definitions of and the mechanisms for determining the deficit, debt and public spending limits applicable to the different levels of government, along with changes in correction procedures and mechanisms in the event of slippage. The new budgetary rules and their legal place in the Constitution respond to a tendency observed in the other European countries, and reflected in various reforms recently introduced into the institutional architecture of the monetary union. Indeed, the economic policy response to the sovereign debt crisis in the euro area is broad-based and includes, among other aspects, a review of the EU’s economic governance framework. The budgetary area has seen the approval, firstly, of a reform of the Stability and Growth Pact (SGP) aimed at reinforcing its implementation, which includes an amendment of its preventive arm with the incorporation of spending developments into the assessment of the countries’ compliance with medium-term budgetary objectives, the strengthening of the public debt criterion, and the introduction of new reporting obligations and financial sanctions for euro area countries which will be applied earlier than at present and more gradually, and whose approval will be more automatic. The reform also acknowledges the importance of an appropriate definition of the fiscal frameworks not only at the European level but also domestically; accordingly, Member States are bound to comply with a series of minimum requirements in their budgetary frameworks in order to contribute more effectively to achieving budgetary stability. Further, in the Treaty on Stability, Coordination and Governance (TSCG), an inter-governmental agreement signed by the European Council on 2 March 2012, the countries undertake to maintain their structural balance in equilibrium and to pass through this commitment to their domestic legal systems and, preferably, to their Constitutions. It is against this background that the reform of the budgetary framework in Spain, which this article analyses in detail, has taken place. In this connection, the following section reviews and analyses the quantitative caps on the deficit, debt and public spending laid down in the new framework, while the third section examines those cases in which the law allows slippage from these thresholds. The reform includes a transitory period running to 2020 in which to move gradually towards the reduction of the deficit and of debt from the current levels to below the limits set. The provisions relating to this transitory period are analysed in the fourth section. The article concludes with a box that summarises the procedures for setting objectives and for monitoring and controlling their fulfilment in accordance with the LEP. The final section draws conclusions. Date: 2013 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bde:journl:y:2013:i:04:n:02 Access Statistics for this article More articles in Economic Bulletin from Banco de España Contact information at EDIRC. |
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