economics

Spain's Sanchez Lays Down Budget Challenge in Bid to Keep Power

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Spain's Sanchez Lays Down Budget Challenge in Bid to Keep Power

  • Spending plan boosts spending on pensions and infrastructure
  • Government will present 2019 budget to lawmakers on Monday
Pedro Sanchez Photographer: Angel Navarrete/Bloomberg
Photographer: Angel Navarrete/Bloomberg

Spanish Prime Minister Pedro Sanchez fired off an opening salvo in what are likely to be high-stakes budget negotiations, hiking social spending to pressure lawmakers to support his plan and ensure he can remain in office through 2020.

The Socialist leader is looking at a more sober economic outlook than when he became premier in June. That gives him less ammunition to horse trade with lawmakers and win approval for the bill, which will be sent to the lower house of parliament on Monday.

Pedro Sanchez applauds during an event on Jan. 12.

Photographer: Lluis Gene/AFP via Getty Images

As it stands, Sanchez doesn’t have enough support in Parliament for the budget and if he fails to get it passed there’ll be pressure to call a snap election. Lawmakers will probably start haggling over the spending program next month and negotiations could stretch on for weeks.

Pain in Spain

Economy has lost some of its early post-crisis momentum

Source: INE, Bloomberg Surveys

The fiscal plan, approved by the cabinet on Friday, is aimed at brandishing his government’s leftist credentials. It would funnel increased corporate and income taxes on high earners into social spending and pensions, and boost infrastructure spending by 40 percent. But some economists say the government’s revenue projections look optimistic.

Despite slower economic growth, Economy Minister Nadia Calvino said the government expects to keep whittling down its debt load, which has spiked in the past decade. The debt-to-GDP ratio may decline to 95.4 percent this year from from 96.9 percent in 2018.

She also said Spain may issue about 35 billion euros ($40 billion) in net debt this year, similar to last year’s issuance. More details will be provided on Tuesday.