The script was written and nobody has wanted to improvise. The Congress of Deputies rejected for the second time on Thursday the stability path proposed by the Government, the document that sets the deficit targets for public administrations and which is a necessary condition for being able to present a Budget. The defeat was expected. So was the Executive's response. The Treasury states that it has legal backing to move forward with the budgetary process and maintains its intention to bring forward a draft budget for 2027, after three consecutive years of extensions. The Executive thus ventures into uncharted territory, as the law does not establish what happens when there is a parliamentary deadlock.
Thursday's vote reproduced last week's result. The parliamentary majority that defeated the proposal held its positions, and the Treasury did likewise by not modifying the content of the path by a single iota. This week's Cabinet approved the same targets that had initially been brought before 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 regional governments, while local authorities were required to maintain budgetary balance.
That tenth of a percentage point of deficit granted to the autonomous communities was one of the Government's main arguments in defence of the proposal. According to the Treasury's calculations, this margin would allow the regions to have 5.849 billion euros in additional funds over three years compared to a zero-deficit scenario. The rejection of the path, the Executive maintains, forces the regions to face an adjustment equivalent to that amount.
Following the setback, the country enters a scenario that is as unprecedented as it is uncertain. Unlike other years, when it halted the process for different reasons, the Treasury does not now want to stop the budgetary machinery. Spokespeople for the department headed by Arcadi España maintain that they have a report from the State Legal Service that endorses their interpretation and allows the drafting of the accounts to continue even without a fiscal path.
According to the thesis defended by the Treasury and which, it claims, the report supports, the parliamentary rejection of the fiscal targets does not eliminate the deficit benchmark communicated to Brussels in the medium-term Fiscal and Structural Plan. 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 shift from a 0.1% deficit to 0%.
In other words, the Government argues that the Treasury could continue drafting a Budget with an overall deficit target of 1.8% of GDP, but without the tenth of a percentage point of leeway for the regions, which would instead go to the central administration.
The Executive's argument also rests on a substantive point. According to the Treasury, the constitutional obligation to present a draft Budget every year carries more weight than a parliamentary deadlock. The Organic Law on Budgetary Stability establishes that, when Parliament rejects an initial proposal, the Government must present a new one within one month. That is what the Executive has done. But the legislation does not say what happens if that second proposal also fails.
That is where the uncharted territory begins. The interpretation now put forward by the Treasury has never been tested. In 2024, the Government had already explored a similar avenue and studied the possibility of relying on the State Legal Service's report, but that option was never applied because the Executive ultimately gave up on presenting new accounts. Now, although the European fiscal governance framework has changed since the new fiscal rules were approved, the Treasury insists that its interpretation remains correct.
