Rules so Spanish public administrations do not spend more than they take in

Automatic summary, not yet reviewed

1. All public administrations must present balanced or surplus budgets, meaning they cannot structurally spend more than they take in. Only in exceptional cases (natural disasters, severe economic recession or extraordinary emergency), approved by an absolute majorityabsolute majority Half of all the members of the chamber plus one: 176 of 350 in the Congreso. of the Congress of Deputies, can the State and the autonomous communities run a structural deficit.
2. Government spending cannot grow above the reference rate of the Gross Domestic Product, and any revenue above what was forecast must be used entirely to reduce public debt.
3. Public debt of all administrations combined cannot exceed 60% of the Gross Domestic Product, split as 44% for the central administration, 13% for the autonomous communities and 3% for local corporations. Paying interest and principal on public debt has absolute priority over any other spending.
4. If an administration misses its targets, it must submit a financial-economic plan within one month to correct the deviation within a year. If it fails to submit, approve or comply with the plan, it must freeze budget credits, post a deposit with the Bank of Spain and, as a last resort, the Government can enforce compliance, even dissolving the governing bodies of a local corporation.
5. Autonomous communities and local corporations that ask the State for help covering short-term debts must accept a public adjustment plan, with quarterly reporting on guarantees, commercial debt and other transactions.
6. There is a transition period until 2020 to reach the structural balance and the 60% debt limit, with reduction paths reviewed in 2015 and 2018. The law repeals the previous budget stability rules and takes effect the day after publication in the official gazette, although the deficit and debt limits apply from January 1, 2020.

Who it affects

• The State, the autonomous communities and local corporations: They must approve balanced or surplus budgets, respect the spending rule and the debt limit, and submit adjustment plans if they miss targets.
• The Social Security administrations: They must keep a balanced position or surplus, and their surplus goes primarily to the Reserve Fund.
• Autonomous communities and local corporations with liquidity problems: They can request financial help from the State, but in exchange for a public adjustment plan and monitoring conditions.
• Banks and financial institutions: They must send data to the information center of the Ministry of Finance about credit operations of the administrations.

Words worth knowing

Déficit estructural (structural deficit)

A gap between revenue and spending that is not caused by the economic cycle, that is, the gap that would remain even if the economy were doing well.

Superávit (surplus)

A situation in which the government takes in more than it spends.

Regla de gasto (spending rule)

A limit that stops public spending from growing faster than the economy (the Gross Domestic Product).

Producto Interior Bruto (PIB, Gross Domestic Product)

The total value of everything produced in Spain in a year; it is used to measure the size of the economy.

Ley orgánica (organic law)

A special type of Spanish law reserved for key matters such as developing the Constitution, which requires broad majorities to pass.

absolute majority

Half of all the members of the chamber plus one: 176 of 350 in the Congreso.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries