The Ministry of Finance has dedicated another year to the Herculean task of balancing the budget, although it is delayed in publishing concrete numbers for this year and the April 1 deadline is swiftly approaching. The European Commission expects that the imbalance will be a mere two-tenths of a point above target, but they are not going to make a big fuss about it.
Madrid and Brussels both expect that when the National Statistics Institute issues its GDP forecast update in September, the economy's future will look a little bit brighter. Montoro said yesterday that this will lead to a 1.5% reduction in the annual deficit. Perhaps this is what the government needs to balance its budget and just the event that Montoro was waiting on. At any rate, a slightly better GDP will greatly improve the government's ability to trim the deficit, which has been weighed down by the Social Security system's poor performance, among other fiscal travails. The problem is that we need to see the numbers now, not in September. So, similar to 2012 when Finance withheld tax rebates in order to pay its bills, now it is considering delaying 2013 payments until this later this year. This is an accounting trick that the European Commission allows, because it knows that the economy is most likely going to improve soon.
It's also worth pointing out that regional and local governments have met their goals, which is an important step toward fixing national accounts. Still, there's a lot of work left to do before the budget is really balanced. Finance needs to stay sharp, even though elections are around the corner, and give positive examples of how to operate a budget with discipline and rigor.