Spain kicks off parliamentary negotiations on budget aimed at curbing populism

By Belén Carreño

MADRID (Reuters) – Spain’s finance minister launched on Thursday what is likely to be a tough fight in parliament to get approval for a draft 2023 budget that features strong social spending and is partly aimed at containing the rise of populism amid economic anxiety.

The current coalition government, made up of the socialist PSOE and the far-left Unidas Podemos, does not have a parliamentary majority and so passage of the budget depends to a large extent on support from regional nationalist groups.

Those include the Catalan pro-independence ERC, which is going through an internal crisis in Barcelona that could distort the negotiations.

The draft budget, approved by the Cabinet on Tuesday, comes ahead of national and regional elections next year and the government is mindful of people’s economic plight as the country faces high inflation and energy costs.

“The public accounts are the main antidote to the economic tensions that this war (in Ukraine) is generating, an antidote to poverty, inequality and, therefore, the hopelessness that is the breeding ground of populism,” finance minister Maria Jesus Montero told reporters.

The draft is packed with new benefits for families, a significant increase of up to 8.5% in pensions and minimum income, up to 2.5 billion euros in education grants, and the extension of free train travel.

The plan also envisages record investments in infrastructure (11.8 billion) and green energy (11.6 billion), thanks to 25 billion euros of EU pandemic recovery funds, including 9.5 billion in new funds that are to be requested from the bloc and will need to meet new conditions.

The budget does not include specific measures to alleviate the effects of the war in Ukraine, which will be decided separately by the end of 2022 when the current relief package expires and which will be financed by a newly created levy on large fortunes, known as “the solidarity tax”.

Controversial taxes on banks and energy companies, from which the state expects to collect up to 3.5 billion euros, are included.

A government source said the budget negotiations could come down to non-budget issues.

“The problem is not the negotiation of the spending items in the budget, the key is all the extra-budgetary issues that these minority parties are demanding in order to support the bill,” the source said.

The accounts have been calculated with an estimated rise in GDP of 2.1%, above the Bank of Spain’s forecast of 1.4%, and an increase in tax revenues of 7.7%, figures that the government describes as “prudent”.

(Reporting by Belén Carreño; Additional reporting by Emma Pinedo; Editing by Frances Kerry)