SPAIN: A RATHER CONSENSUAL DRAFT BUDGET FOR 2019

Pedro Sanchez’s minority government has just presented the key features of the 2019 draft budget. The government complies with the European rules in terms of fiscal consolidation as far as possible and has three objectives: Putting an end to the excessive deficit procedure by pressing ahead with the reduction in the fiscal deficit and pursuing a primary surplus for the first time since 2007; Dampening the previous government’s austerity policies, thereby ensuring support from its main parliamentary ally, Podemos; Creating a sufficient consensus with the rest of the regional parties in the Congress of Deputies, whose support it needs to get the budget approved. By probably succeeding in getting enough votes for its budget, it seems that the government now will be able to focus on business, at least until the European elections on 26 May that will coincide with Spanish regional and municipal elections. These elections will be the first full-scale test of the executive’s popularity after one year of managing the country. Lastly, the stabilisation of the political horizon in the short term, the vigour of the economy and a positive rating are likely to result in a further tightening of the spread on Spain’s sovereign bonds .