The Sustainability of Public Finances in Spain

Abstract

Concern regarding deficits in the public accounts in Europe and the United States has led politicians and researchers to consider sustainability of fiscal policy understood as the fulfillment of the intertemporal budget constraint established by the government which indicates the extent to which accumulated and future debt can be paid for by means of current and future taxes, and also cover standard public expenditures.

The present article analyzes the sustainability of the national deficit in Spain for the period 1960-2016 by considering public revenue and spending in both real terms and percentages of gross domestic product using data from diverse Spanish sources. It utilizes the equations formulated by Quintos and adapts them when using variables as percentages of gross domestic product. This work concludes that Spanish debt is barely sustainable, which implies the need to instate fiscal reforms or, at least, make an effort towards consolidation.

This result is accord with the situation of Spanish debt and deficit in the period after the crisis of 2008.