The loss of institutional quality due to the decrease in the control of corruption, accountability, the rule of law, political stability and regulatory quality, all of them deficient in the case of Spain, place our country in a position “below the average among the most advanced countries.” This is noted by the Bank of Spain (BDE) in its latest annual report of 2024, which highlights the serious worsening of the quality of the institutions – “these understood as the set of laws and norms that regulate socio -economic relations,” says the supervisor -, which have negatively influence from Pedro Sánchez. The outstanding variables in the report with the greatest weighting refer to issues such as the State’s capacity for the management of public affairs and the perceptions of citizens about the incidence of corruption, which in all cases have a negative incidence in the economy.
Although BDE analysts recognize that the measurement of institutional quality is subject to “difficulties of different nature”, the available indicators show that Spain “does not occupy a preferential place in international rankings in this dimension.” In addition, there would have been a clear worsening of such institutional quality, which “could condition the growth capacity of our economy in the future.”
As indicated by the report, Spain is one of the 32 OECD countries considered in the index that institutional quality (IND1 2001-2010) the fifth that has suffered a greater fall in the indicator. Only Hungary, Poland, the United States and Iceland have experienced a major decrease in this indicator. The same happens in relation to the IND2 indicator, between 2011 and 2021, in which Spain forms, together with Greece and Hungary, the podium of the OECD countries with the greatest worsening of institutional quality. The variables that explain this deterioration are, in the case of IND1, those related to the control of corruption, voice and accountability and the rule of law. In the case of IND2, they would be the variables related to the rule of law, political stability and regulatory quality, all of them deficient in the case of Spain.
In this context, the bank regulator also stands out as a destabilizing element of the Spanish economy political polarization. He believes that such polarization can “lead to conflict, to the low cooperation and a legislative block,” delay “necessary economic reforms” and increase the “uncertainty about the stability of business activity”, which can translate into “frequent changes in economic policies”, with a negative impact on the investment and predictability of the business environment. “Polarization tends to distort the perception that citizens have of the economic situation, affecting their level of trust and their spending decisions,” BDE analysts warn, who believe that the problem will go more.
The banking agency notes that polarization in Spain appeared after 2015 and has followed a “sustained increase” until today, in which “the levels are considerably higher than two decades ago, which suggests a deep transformation in the” political dynamics “and a reason for” concern. ” They must contemplate “strategies that mitigate their effects on the political and economic stability of Europe,” they argue.
The Bank of Spain has also severely criticized the fiscal and structural plan presented in Brussels by the Government of Pedro Sánchez because “it is the opportunity to rigorously plan” the medium -term public accounts and benefit from the “growth pattern” presented by the Spanish economy, and thus joins the doubts that the independent authority of fiscal responsibility (Airef) regarding the “serious lack of information” in the monitoring of this plan. The bank supervisor has joined these criticisms and shaves the Executive who “does not include a sufficient detail of the budgetary measures that have to be adopted to achieve the established objectives” or long -term income and expenses forecasts. Some deficiencies that “reduce their usefulness as a tax planning instrument.”
It is also disappointed because the fiscal adjustment has not been executed “taking advantage of the current economic dynamism, which would reduce the uncertainty associated with risk” and allow “a fiscal adjustment of a procyclical nature later.” According to the regulator, the Fiscal Plan establishes an average annual growth of net expenditure – the computable expense -, from 3% to 2031, which see “compatible” to reduce it gradually from 3.7% in 2025 to 3% in 2028 and at 2.4% in 2031 per year and six tenths in the accumulated on the expense objectives established in the fiscal plans, an escape clause to face the defense spending that Spain has not yet decided to activate.
Finally, the Bank of Spain points out that the situation of public finances is still characterized by an “appreciable structural imbalance” and a “high indebtedness ratio”, which has complicated to meet the medium and long term fiscal objectives.