The government's forecasts for the next several years sows doubt about whether it can comply with tax limits set out by Spain's Ley de Estabilidad Presupuestaria, a law designed to stabilize spending and revenues for the national budget. Created last year, it is one of the feature bills that Rajoy's government has created.
Rising national debt, which will equal 100% of the national GDP in 2016, is already near the 60% debt/GDP ratio that the law says will be the maximum allowed in 2020.
This means that in order for Spain to meet its budget objective, it will have to slash its debt by more than 400 billion euros in just four years. For this reason, Profesor Pisani-Ferry warns that even if Spain extends the time frame that it has to meet its goal, debt needs to be cut significantly.
The only way to do that is to trim structural deficits through financial and public sector reforms.
