The dangerous journey with the pro-independence parties on which the President of the Government, Pedro Sánchez , embarked to carry out the General State Budgets, could be very expensive for the Spanish economy.
This is what the Goldman Sachs analysts believe , who do not see favorably that the chief executive takes advantage of the reconstruction funds that Spain will receive from the European Union to try to achieve political stability, instead of prioritizing economic growth and the fight against the coronavirus .
In a report signed by the economist Filippo Taddei , Goldman considers that the challenges presented by the pandemic have triggered an “unusual convergence of interests” between the coalition government of the PSOE and Podemos with the regional parties (EH-Bildu, ERC and PdeCat) .
The risk of turning regional fragmentation into a political asset
The consequence is that the Government will have to be more flexible in the distribution of money, deploying “a new strategy to return a large part of European funds to regional authorities.”
This amount is put by analysts at Goldman Sachs at 18 billion euros or 1.5% of GDP. It is money that emerges as a consequence of converting “regional fragmentation into a political asset,” they explain in the entity.
In general, “this strategy has ensured the support of fundamental regional parties, essentially, the Basque and Catalan and has paved the way for the approval of the budget”, are dispatched in Goldman Sachs.
The regions, a fundamental piece in fiscal policy
The problem is that regional authorities are now a “fundamental piece in the implementation of the most relevant structural component of Spanish fiscal policy.” And it is something that has not happened in the rest of European countries.
And since the capacity of this implementation of these fiscal policies differs between the different regions, this “exposes the Government to an additional risk”, since the measures it takes to stimulate the growth of the country as a whole could be compromised.
On the other hand, they explain at Goldman Sachs , by retaining that ability to allocate European funds, Sánchez’s Executive becomes a kind of “broker” or political intermediary between the central government and regional parties.
18 billion Europeans in exchange for raising budgets
Thus, the fact of putting in the hands of these parties 18,000 million euros in exchange for the support to carry out the budgets, they consider in Goldman as “a limitation” in every rule.
“These concessions to regional fragmentation are added to the regionalism that has weighed heavily on public investment, skewing its distribution and the likely implementation of structural projects,” the analysts point out.
Furthermore, given that the new political commitment depends fundamentally on European funds, ” Spain’s political stability will depend on the prompt approval of the EU budget, ” the experts from the US bank emphasize.
Instability in sight
For this reason, any delay in the approval and adoption of the budget will probably lead to “greater political instability in Spain.” In this way, the Goldman Sachs economists conclude their notice by highlighting that with this way of proceeding, Sánchez has exposed the country to “new risks.”
“By traveling this narrow political path to achieve support and approval of the budget, the ruling coalition seems to have tied its destiny to the support of regional parties”, they are dispatched in the entity.