Spanish Congress Rejects Government's Spending Path, Setting Stage for Budget Challenges

On Thursday, the Congress of Deputies voted against the Government's proposed spending plan, a crucial step towards establishing the national budget. The fiscal targets outlined by Finance Minister and First Vice President María Jesús Montero were dismissed after being scrutinized throughout the week. This rejection stemmed from the abstention of Podemos, as well as from Águeda Micó, a Compromís deputy in the Mixed Group, alongside a negative vote from Junts, signaling their break from the Executive. The opposition parties, including the PP, Vox, and UPN, all voted against the proposal as anticipated. In contrast, several parties that form part of the coalition supporting Prime Minister Pedro Sánchez—the PSOE, Sumar, RC Bildu, PNV, Coalition Canaria, and BNG—voted in favor of the spending path. This marks the fifth unsuccessful attempt by the Government to secure approval for this deficit path during its current legislative term. Previous rejections have either been due to the Senate's blockade by the PP or Junts’ withdrawal from the investiture bloc. Looking ahead, the Ministry of Finance, led by Montero, plans to reintroduce the same fiscal path in the near future. Should it face another rejection, the Government intends to present the 2026 Budgets based on the stability path submitted to the European Commission in 2023, which may render the pathway to a feasible budget unattainable. This ongoing impasse has significant implications, particularly for Spain's autonomous communities, which will experience reduced operational capacity due to the stalled national spending plan throughout the Legislature. Montero is targeting the first quarter of 2026 for the budget presentation, with hopes to finalize discussions by April or May. The stability targets that were rejected sought to reduce the Public Administrations' deficit from 2.1% in 2026 to 1.8% in 2027 and further to 1.6% in 2028. Specific deficit goals were set for various subsectors: 0.1% of GDP for autonomous communities from 2026 through 2028, while maintaining budgetary stability for local authorities during this timeframe. For the General Administration of the State, the proposed deficits were 1.8% in 2026, 1.5% in 2027, and 1.4% in 2028. Meanwhile, Social Security had an expected deficit of 0.2% in both 2026 and 2027, dropping to 0.1% in 2028. A record spending ceiling of €216.177 billion was also proposed for 2026, adding further complexity to the discussions ahead. This budgetary gridlock raises pressing questions about the fiscal future of Spain and the capacity of the current government to maneuver through legislative challenges. Related Sources: • Source 1 • Source 2