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2. Spanish medium term strategy for determining and achieving selected

priorities in the composition of total public expenditure

The Spanish medium term strategy consists of two different kinds of measures:

• First of all, fiscal policy is committed to the balanced budget principle, by continuing with the
  fiscal consolidation process implemented over recent years and by fully respecting the EU
  commitments agreed upon into the SGP framework.

Table 1 includes public finances forecasts for the next five years (Stability Programme Update)

Table 1 – General Government Accounts

(National Accounts, ESA-95. As % of PIB)

Item 2003 (A) 2004 (F) 2005 (F) 2006 (F) 2007 (F) 2008 (F)

Total revenues 40,0 39,9 39,9 40,0 40,1 40,2

• Tax revenues 36,2 36,3 36,4 36,4 36,5 36,6
  Direct 10,6 10,5 10,6 10,6 10,6 10,6


• Households 7,2 7,1 7,1 7,1 7,1 7,1


• Companies 3,4 3,4 3,5 3,5 3,5 3,5
  Indirect 12,0 12,0 12,1 12,1 12,2 12,2
  Social contributions 13,7 13,7 13,7 13,7 13,8 13,8
  Total expenditures 39,6 40,6 39,8 39,8 39,8 39,8


• Current 34,8 35,1 34,8 34,7 34,6 34,6
  Interest charges 2,5 2,3 2,1 2,0 1,9 1,9


• Capital 4,8 5,5 5,0 5,1 5,2 5,2
  Gross Capital formation 3,5 3,7 3,6 3,6 3,7 3,8
  General Government Surplus (+) or
  deficit (-) 0,4 -0,8 0,1 0,2 0,4 0,4
  Central Government 0,7 -1,0 0,2 0,3 0,4 0,4
  State and Autonomous agencies -0,3 -1,8 -0,5 -0,4 -0,3 -0,3
  Social Security 1,0 0,8 0,7 0,7 0,7 0,7
  Territorial Government -0,3 0,2 -0,1 -0,1 0,0 0,0
  Autonomous Communities -0,2 0,2 -0,1 -0,1 0,0 0,0
  Local government -0,1 0,0 0,0 0,0 0,0 0,0
  Gross debt 50,7 49,1 46,7 44,3 42,0 40,0
  Primary surplus 2,9 1,5 2,2 2,2 2,3 2,3
  Gross saving 4,4 4,1 4,4 4,6 4,8 4,9
  (A) Advance
  (F) Forecast
  Source: IGAE and Ministry of Economy and Finance
  
  
  • Secondly, this fiscal stability gives the Spanish authorities sufficient leeway to improve the quality
    and sustainability of public finances by mainly gearing public finances to those priorities with high
    impact on productivity.
  
  
  
  

In fact, the General State Budget for 2005 includes a clear shift in spending by prioritising and
strengthening those items with the largest impact on medium and long term potential growth, in
particular by raising the allocation for active labour market policies, R&D&I, education and
infrastructure (Figure1).