The president of the PP and candidate for the presidency of the Government, Alberto Núñez Feijóo, during his speech in the first session of the debate of his investiture this Tuesday in Congress. EFE/Juan Carlos Hidalgo
The president of the PP and candidate for the presidency of the Government, Alberto Núñez Feijóo, reiterated this Tuesday during the investiture debate his intention to “temporarily extend” and expand some of the measures implemented by the Sánchez Executive to alleviate the effects of inflation and the energy crisis in companies and families. A complicated approach to implement in the coming months, especially from 2024, if we want to comply with what the European Commission is asking for and reduce the deficit to 3%.
Specifically, Feijóo has proposed temporarily extending the VAT reduction on food and also expanding it to meat, fish and preserved foods. He has also proposed “maintaining the rest of the measures in force against inflation” until prices are controlled “with intensity.” In this package he has mentioned the reduced VAT rate on electricity and gas; aid of 200 euros for the most vulnerable and free public transport. Although in this last aspect he does intend to study with the Tax Agency a method so that its application is done with an income limit.
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This clashes with the specific spring recommendations of the European Commission in which it urged all member states to withdraw the extraordinary measures taken due to inflation and the war in Ukraine and, if they had to leave any, that they be only the targeted ones. in the most vulnerable groups. Furthermore, the VAT reduction is more taken advantage of by high incomes, who are the ones who consume the most, which makes it a non-targeted measure that subtracts a notable part of the State’s revenue.
The simple disappearance of measures such as the VAT reduction on food, electricity and gas, among others, will improve the budget balance for 2024, since they represent a net primary expenditure of 0.6% of GDP in 2023, according to Brussels. These savings “should be used to reduce the public deficit,” the commission points out. The reduction in the deficit is, precisely, the second obstacle that complicates the expansion of the entire package not only temporarily, but also to some products that are currently not on sale.
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The return of fiscal rules means that the deficit must be 3% in 2024, as foreseen by the Government’s Stability Program, although the European Commission estimates 3.3%. If not, Spain could face a penalty for excessive deficit. The Independent Authority for Fiscal Responsibility (AIReF) does see it as feasible for the deficit to reach 3% next year as long as the package of measures is withdrawn.
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