The script was written and no one wanted to improvise. The Congress of Deputies rejected for the second time this Thursday the stability path proposed by the Government, the document that sets the deficit targets for public administrations and is a necessary condition for presenting a Budget. The defeat was expected. So was the Executive’s response. The Treasury assures it has legal backing to proceed with the budgetary process and maintains its intention to present a draft budget for 2027, after three consecutive years of extensions. The Executive thus enters unknown territory, as the law does not establish what happens when there is parliamentary deadlock.
This Thursday’s vote reproduced last week’s result. The parliamentary majority that overturned the proposal maintained its positions, and the Treasury did the same by not modifying the content of the path one iota. This week’s Council of Ministers approved the same targets it had initially brought to Congress, which proposed a deficit of 1.8% of GDP for all public administrations in 2027, distributed as follows: 1.5% for the central administration, 0.2% for Social Security, and 0.1% for the communities, while local entities had to maintain budgetary balance.
That tenth of a deficit granted to the autonomous communities was one of the Government’s main arguments to defend the proposal. According to Treasury calculations, this margin would allow the communities to have an additional 5,849 million euros over three years compared to a zero-deficit scenario. The rejection of the path, the Executive maintains, forces the communities to face an adjustment equivalent to that amount.
After the setback, the country enters a scenario as unprecedented as it is doubtful. Unlike other years, when it paralyzed procedures for different reasons, the Treasury does not want to stop the budgetary machinery now. Spokespersons for the department headed by Arcadi España maintain that they have a report from the State Attorney’s Office that supports their interpretation and allows them to continue with the preparation of the accounts even without a fiscal path.
According to the thesis defended by the Treasury, and which, it assures, is supported by the report, the parliamentary rejection of the fiscal targets does not make the deficit reference communicated to Brussels in the Medium-Term Fiscal and Structural Plan disappear. What changes is the internal distribution. Thus, in the absence of a path, the autonomous communities would be subject to the constitutional principle of budgetary balance and their target would change from 0.1% deficit to 0%.
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That is, the Government maintains that the Treasury could continue preparing a Budget with a global deficit target of 1.8% of GDP, but without the tenth of a margin for the communities, which would go to the central administration.
The Executive’s argument is also based on a fundamental issue. According to the Treasury, the constitutional obligation to present a draft Budget each year outweighs parliamentary deadlock. The Organic Law on Budgetary Stability establishes that, when the Cortes reject a first proposal, the Government must present a new one within one month. That is what the Executive has done. But the rule does not say what happens if that second proposal also fails.
That’s where unknown territory begins. The interpretation now put forward by the Treasury has never been tested. In 2024, the Government already explored a similar path and considered relying on the report from the State Attorney’s Office, but that solution was never applied because the Executive ultimately decided not to present new accounts. Now, although the European fiscal governance framework has changed since the approval of the new fiscal rules, the Treasury assures that its interpretation remains correct.
