• The macroeconomic picture foresees a GDP growth that is accelerating slightly, reaching 3% in 2017
  • At the end of 2015, unemployment will be lower than at the end of 2011 both in number of unemployed and in rate
  • For the first time since the start of the crisis, in 2014 there will be net job creation
  • Domestic demand will contribute positively to growth in 2014, after six years of negative contribution
  • The Government improves the objective of reducing the public deficit for 2014 from 5.8% to 5.5% of GDP
  • The new Stability Program includes a wide-ranging tax reform with an approximate impact of the personal income tax reform that will reach 5 billion euros net in two years
  • The tax cut will focus on low and medium income taxpayers
  • The reform scenario fits perfectly into the process of recovery and fiscal consolidation

The Council of Ministers today approved the Stability Program and the National Reform Program, which will be forwarded this afternoon to the European Commission within the obligations of the Member States within the framework of the European Semester.

It is the third time in this legislature that the Government draws up and presents these two Programs, but it is the first time that they are carried out in a context of economic recovery.


The 2014-2017 macroeconomic picture notes the recovery of the economy but it maintains the conservative nature of the previous Stability Program. The assumptions used are prudent and realistic and their objective is to give credibility to the public deficit targets. Economic growth is expected to accelerate smoothly, reaching 3% at the end of the period. Already during the current year There will be significant positive growth, for the first time since the crisis began, net job creation and reduction in the unemployment rate. These are projections that certify the exit from the crisis and that configure a new less vulnerable economic model.

For this year and the following three, it is estimated that balanced economic growth will be achieved, sustained over time and generating employment. The sustainability of growth is achieved by the significant progress made in correcting the main imbalances in the Spanish economy. The competitiveness lost since the entry into the euro has recovered, prices have moderated considerably, private indebtedness has decreased appreciably, the public deficit has been reduced despite the recession and a current account surplus has been reached and a financing capacity vis-à-vis the exterior, which allow the process of reducing external indebtedness to begin.

A notable aspect of the macroeconomic picture is that Throughout the forecast period, both internal and external demand will contribute positively to growth. Domestic demand will do so for the first time in 2014, after six years of negative contribution to growth. The higher the consumer confidence, the better employment prospects and the moderation of prices, they will favor private consumption, which will gain momentum throughout the period. At the same time, also in 2014 gross capital formation will grow for the first time in seven years, due to the dynamism of investment in capital goods. The growth of construction investment is estimated from 2015. External demand will continue to contribute positively to the variation in GDP, within a framework of growth in imports. This is explained by the maintenance of the dynamism of exports, associated with the continuity of competitiveness gains, and the better growth prospects of the main export destination markets.

Equally, will continue to increase the financing capacity of the Spanish economy, to stand at levels around 2.5% of GDP, which will allow reducing foreign indebtedness. This reduction could be close to 47,000 million euros in the 2014/2015 biennium, thanks to the financing capacity compared to abroad expected during those years.

In addition to a sustained recovery over time, it is a dynamic that generates employment. The structural improvements achieved with the 2012 Labor Reform will enable job creation with lower growth rates than in the past. Already Net employment will be created in 2014, for the first time since the start of the crisis. For the 2014/2015 biennium, a significant reduction in the activity growth threshold is estimated to lead to job creation. Likewise, significant progress will be made in reducing unemployment. For the first time since the start of the crisis, in 2014 EPA unemployment will decrease in annual average terms. At the end of 2015 unemployment will be lower than at the end of 2011 both in number of unemployed and in rate.


The update of the Stability Program of the Kingdom of Spain (2014-2017) establishes that the new deficit target for all Public Administrations for 2014 will be 5.5% of GDP. This forecast supposes a reduction of three tenths against the previous objective (5.8%), which had been validated by Brussels.

There are two main reasons for this downward revision: on the one hand, the finding that the return to economic growth is going to be faster and stronger than expected when the target was set at 5.8% . On the other hand, the success in the fight against the deficit reached by the Public Administrations in 2013, which is allowing the Treasury to finance itself in better conditions, with the consequent reduction in the debt interest bill.

The reforms undertaken by the Government and the fulfillment of the deficit target of 2013 by the public administrations as a whole have resulted in a recovery in market confidence with the corresponding fall in the risk premium. Since the maximum reached in July 2012 (636 basis points), the risk premium has fallen by almost 500 basis points. This commitment to fiscal consolidation, which is maintained in the 2014 General State Budgets, is allowing the Treasury to finance itself with much lower rates, so that the debt interest bill will decrease considerably.

On the other hand, the forecast of an improvement in GDP growth due to the boost in activity is already being noted in the tax collection in the first months of the year. In the previous Stability Program, it was stated that, in the event of an improvement in the economic cycle, its results would be transferred to reducing the deficit, maintaining the structural effort and this has been done.

In this way, the new path of fiscal consolidation will reduce the public deficit from 6.6% of GDP achieved in 2013 (without financial aid) to 5.5% of GDP in 2014. The deficit reduction will continue in the coming years This is expected to decrease to 4.2% in 2015, and to 2.8% in 2016, already below 3% of the Excessive Deficit Procedure. In 2017, the deficit will barely stand at 1.1% of GDP.

Of the deficit target of 5.5% of GDP for 2014, 3.5% will correspond to the Central Administration, which closed the year 2013 with a deficit of 4.3% (without financial aid). This supposes a reduction of eight tenths in a year, which shows that The Government's commitment to fiscal consolidation remains. The forecast also indicates that Social Security will have a deficit of 1% of GDP, the same percentage that will correspond to the autonomous communities, while local entities must close the year in budget balance.


The main objective of the 2014 National Reform Program, which continues the reformist agenda initiated by the previous two, is to consolidate the economic recovery so that growth is sustainable and job creation is favored.

Like its predecessors, the PNR 2014 is structured in five main areas:

  • Differentiated and growth-promoting fiscal consolidation
  • restore normal lending conditions to the economy
  • fostering growth and current and future competitiveness
  • fight unemployment and the social consequences of the crisis
  • modernize public administration

1. Differentiated fiscal consolidation and growth-promoting

The Government will continue to fulfill its commitments in 2014. The consolidation of public accounts and the achievement of budgetary stability have been central elements of the Government's economic policy to grow and create jobs.

In this area, the main novelty will be tax reform which will be presented with the following objectives:

  • improve the collection capacity of our tax system
  • promote growth and employment
  • contribute to improving the competitiveness of the Spanish economy
  • reduce fraud
  • contribute to fiscal consolidation

It will be a comprehensive tax reform, of wide draft, and designed in several stages. The approximate total impact of the personal income tax reform will reach 5 billion euros net in two years.

The objective is to simplify taxes and improve efficiency in a coordinated way in all of them so as to stimulate economic growth and job creation. The reform will include, among others, Personal Income Tax and Corporation Tax. Furthermore, it includes indirect and environmental tax reforms, always linked to community regulations. The tax cut will begin in January 2015, focusing on low and middle income taxpayers.

The process designed in stages will allow a temporary adaptation to the new tax conditions. In this way, the tax reduction for taxpayers will be made compatible with an income of around 38% – 39% of GDP.

The tax reform will therefore serve to consolidate the growth of tax collection, fruit of the reforms undertaken by the Government and which have allowed the improvement of the economic situation. The latest available data, referring to the first quarter of 2014, consolidate the change in trend started at the end of 2013 and already place the growth in tax collection at 4.7% in homogeneous terms, and above 5.1% in gross rate. The growth of the income of SMEs and the self-employed is particularly noteworthy (for fractional payments it reaches 6.3%), which is the highest rate since 2007.

2. Restoring normal loan conditions to the economy

To consolidate the economic recovery it is necessary to reactivate credit. After the reforms of the last two years, the Government considers that the financial sector is in a position to exercise its essential function and wants to contribute to promoting this process. For it:

  • The ICO In 2014 it will have up to 24,000 million euros of loanable funds.
  • The Law for the Promotion of Business Financing.
  • Regulation of Venture Capital Entities will be improved; The regulatory framework for security interests will be reformed, and Spanish law will be adapted to the new Basel III framework.

Furthermore, in order to guarantee the survival of companies with an excessive accumulated financial burden but viable from an operational point of view, the legal regime of bankruptcy agreements will be relaxed, especially with regard to majorities and their effects. The legal regime of bankruptcy administration will also be reviewed.

3. Promote growth and competitiveness, present and future

Growing in a sustained way requires guaranteeing a continued competitive functioning of the Spanish economy. To this end, in 2014, the Government will continue to adopt measures that guarantee the flexible operation of the markets and that allow for a moderate adjustment in prices. In addition, it will implement measures that promote growth in the medium term, by improving training and research.

  • The process of normative adaptation to the Market Unit Guarantee Law (LGUM). Important steps have already been taken in this process, which will take place throughout 2014 and 2015. So far, the need to adapt more than 2,700 standards has been detected.
  • The Deindexation Law of the Spanish Economy.
  • Measures of support for entrepreneurship and in 2014 a Plan to Combat breach of administrative deadlines that affect companies and citizens.
  • It will launch anew model of training for employment and measures in the field of innovation and new technologies. The objective is to continue improving the education and training systems of the human capital.
  • CNMV reform. The objective is to provide this body with greater autonomy for the fulfillment of its functions and with more capabilities in its regulatory, inspection and sanctioning actions, in line with international trends.

4. Fight unemployment and the social consequences of the crisis

In 2014, the Spanish economy began to create net employment and to boost it, the Government is adopting measures to promote job hiring and the activation of the unemployed:

  • Will be adopted the Spanish Activation Strategy for employment 2014-2016 culminating the transition towards a system of evaluation and orientation to results of active employment policies.
  • The National Plan for the Implementation of the Youth Guarantee, which is funded by community funds for an amount of 1,887 million euros in 2014 and 2015.
  • Measures will be promoted to combat the worsening of profiles of poverty and social exclusion. More specific actions aimed at groups with special difficulties in accessing the labor market will be developed because the most effective way to fight poverty and social exclusion is through job creation and job placement.
  • Along with the reinforcement of labor insertion, other actions included in the National Action Plan for Social Inclusion 2013-2016, the National Comprehensive Strategy for the Homeless that will be adopted in 2014 or the reform of the protection legislation to the childhood. Likewise, in 2014 the Law on the Third Sector of Social Action and the reform of the Law on Volunteering will be presented.

5. Modernize Public Administration

A competitive economy requires modern, transparent and agile Public Administrations. On this premise, the Commission for Administration Reform was created (CORA) in 2012, which has carried out the most important review exercise that has been carried out on the Spanish public sector in recent decades, as the OECD recently recognized.

In 2013, significant progress was made in this process, and this year the regulatory effort will continue and savings will be computed as implementation progresses. It is estimated that in 2014 the completed measures will amount to approximately 50% of the total.

  • A new Law on the Legal Regime of Public Administrations and Common Administrative Procedure.
  • Measures to improve the efficiency of the State Treasury, to rationalize and eliminate duplications, to increase efficiency in the configuration and management of public employment, and to promote electronic administration and reduce burdens.

On the other hand, it is advancing in measures of democratic regeneration, strengthening of institutions and fight against corruption. This constitutes an essential element to regain the trust of citizens in institutions through preventive measures and initiatives that close spaces for impunity, better detect crimes and punish them more harshly.

The actions already carried out in 2012 and 2013 are completed with two bills that will be approved in 2014:

  • The draft Organic Law to control the economic and financial activity of the Political Parties.
  • The draft Law regulating the exercise of the high office of the General State Administration.

Structural funds

Among the novel elements of the 2014 PNR, it relates the reformist priorities of the Government and its objectives of economic policy and job creation with the programming of the Structural Funds allocated to Spain in the new period 2014-2020. Thus, in the programming of the Funds, measures will be promoted to increase productivity and employment, boost private investment and develop sectors with high growth potential.

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