Independent Authority for Fiscal Responsibility, (AIReF), has calculated the cost of the latest decree law that was approved by the Government in order to expand the economic response to the crisis in energy at 6,989 millions euros. This represents an increase of 1% in the public debt.
Cristina Herrero, the president of the organization, stated this during her Monday appearance before Congress' Finance and Civil Service Commission of Congress to report on the Report of the Update of the 2022-2025 Stability Program.
AIReF estimates the extension of tax reductions on electricity. This was extended with the reduction by five points up to 5% of the VAT levied upon the electricity bill.
This calculation excludes the suspension of Tax on the Value of Electric Energy (IVPEE), of 7.7%, which the companies borne. It is an income that is used to pay the tariff deficit with electricity.
AIReF has estimated that the 5,217 million euro remaining will be used to extend the bonus of 20c per liter of gasoline at 3,465million. The figure for individuals is 1,257million --540 million direct assistance, where the check is framed for families to cover the cost of inflation, and 495 million to sectoral aid.
The Government's scenario calls for a convergence in the deficit to the Stability Pact threshold (3% GDP) by 2025, and a path to debt reduction. However, AIReF believes that there are elements that still recommend a medium-term strategy to strengthen the underlying financial position and reduce vulnerability to adverse environment. It reiterates its recommendation that the Ministry of Finance establish a medium-term fiscal plan that provides fiscal guidance and guarantees fiscal sustainability of the Public Administrations.
Cristina Herrero recalled this as a reminder that sustainability is the core of the ECOFIN guidelines. While the quantitative rules were replaced by guidelines in 2023, certain quantitative elements had been included and pointed to adjustment paths for 2023. Particularly, Spain was recommended a prudent fiscal course with growth in current expenditure and national financing below the potential GDP. This would result in a deficit that is lower than what was forecasted by AIReF or the Government. A credible and gradual path to debt reduction is recommended beyond 2023.
AIReF, on the other hand, proposes a new recommendation about the need to allocate income above expectations and temporary to accelerate the reduction of the structural gap and to avoid spending increases or income reductions of a structural nature without structural financing. Another recommendation is to evaluate the effectiveness, efficiency, and redistributive impacts of existing measures before deciding on possible extensions.