In the summer of 2002, Minister of Finance Cristóbal Montoro declared that the country's balance sheet was going to be in the black. But that didn't happen until a year later. Several months ago, in the midst of a very similar year, Montoro seems satisfied with the results of the 2012 budget imbalance (it is 6.7% of the country's deficit) and announced that more cutback measures would not be needed in 2013.
The reality is that we need even more spending cuts and tax revenues are showing signs of slowdown. The 2012 accounts are balanced, sort of, because the government has deferred payments it owes to service providers and tax refunds to corporations until the 2013 fiscal year -- both legal accounting tricks. Because there is no amount of touching up that can last forever, Spain's tax revenue and budget outcomes, which the Ministry of Finance's website posted without notifying any media sources as usual, show that Montoro's attempts to reduce the annual deficit were weak. Incredible Q4 2012 revenues, led by higher corporate taxes and a new VAT (77.8% and 28.4% respectively) have, were only possible by postponing tax refunds. In January of 2013 these figures jumped nearly 83% year to year.
Spain's structural problems will not go away by touching up the budget here and there. These patches will fix last year's imbalance, but they will not solve the root of the problem: high expenses and low revenues. Cristóbal Montoro ought to know better, especially when his ministry engineered reforms of the tax sector and public sector, the latter of which is still pending.
