Blake Schulman
One major
amendment to the Spanish Constitution occurred in 2011, when the Spanish
government approved a constitutional reform of article 135 to implement a
deficit limit and a required balanced budget at both the regional and national levels that
would constrain the spending and borrowing of the Spanish government (1). This
is one of only two amendments that have been passed by the Spanish government
since the creation of their constitution in 1978, signifying the value of both
amendments and their importance to the welfare of the country.
The main economic factors that brought about the creation of this amendment were rising deficits, the will to ensure Spanish
citizens protection from the ruling parties’ economic policies and spending,
and the necessity to better align their economic policies with those of the European Union
(1). The amended article states that structural deficit limits will be tied to
the margin established by the EU, which is set at three percent of annual GDP;
the national public debt limit will also be set at a limit of sixty percent of
annual GDP established by the EU (2, 3).
Starting in
2008, Spain’s economy entered a recession due to falling
growth and a public account surplus that had rapidly turned into a deficit.
Spain created a bank bail-out fund of up to 99 billion Euros to prepare for
major economic fallout (4). There was an urgency to take control of the growing
deficit and get back on track with the economic expectations and guidelines
established by the European Union. Outside influences from Chancellor Merkel of
Germany and President Sarkozy of France further pushed Spain to act on a stronger
and permanent deficit management policy after each country proposed to write debt
limits into national law (1). This vital amendment would force Spain to
reevaluate its economic policies and management of financial institutions in
order to find economic relief and avoid any future impending economic recessions. The
amendment also sets a guideline for the deficit to completely disappear by the year
2020, which will allot Spain the time to plan out an attainable economic solution
(5).
This amendment
was created in the fallout of unforeseen circumstances due to enduring
economic strife in Spain. It can be assumed that the writers of the Spanish
Constitution did not take into account the probability of severe and harmful
economic recessions that would lead to frequent government borrowing and high accumulation
of debt. Article 131 of the Spanish Constitution delegates the nation the power
to “plan general economic activity by an act in order to meet collective need,”
but details no specific guidelines of the actions to take in the wake of an
economic collapse (3). Furthermore, Spain could have delegated the responsibility
of lowering the deficit to the powers of Spanish banks, which held half of all
banking assets; however, much of their banking system was unregulated and
inefficient. These Spanish savings banks, or cajas, were not required to disclose a history of repayment or
collateral on their loans to Spain’s Central Bank, leading to increasingly
risky and unreliable lending (6). Finding a consensus within the national
government and instating national laws to guide the relief of the economy was
the most effective way to solve the debt crisis and prevent future crises from
occurring.
- Spanish Constitution Reform. http://aei.pitt.edu/32483/1/PB_253_Abad_and_Hernandez_on_Spanish_constitutional_reform.pdf
- Balanced Budget Amendment. http://en.wikipedia.org/wiki/Balanced_budget_amendment#Spain
- Spanish Constitution 1978. https://www.constituteproject.org/constitution/Spain_2011.pdf
- Spain’s Economic Crisis: a Timeline. http://www.telegraph.co.uk/finance/financialcrisis/9319175/Spains-economic-crisis-a-timeline.html
- Spain’s King Signs Deficit-Capping Constitutional Amendment http://latino.foxnews.com/latino/politics/2011/09/27/spains-king-signs-deficit-capping-constitutional-amendment/
- The Spanish Financial Crisis: Economic Reforms and the Export-Led Recovery. http://www.studentpulse.com/articles/921/the-spanish-financial-crisis-economic-reforms-and-the-export-led-recovery
The leader post touched upon the effects of the amendment where it said that the amendment would force Spain to reevaluate its economic policies. I would like to discuss how far the amendment actually forced Spain to reevaluate its economic policies, and propose that the amendment has not been effective as a means of curbing deficit. First, there is the empirical data regarding the rising amount of debt in comparison to GDP, and the second is the wording in Article 135 that undermines itself as a legitimate limit on the debt of the country.
ReplyDeleteThe aim of the amendment to Article 135 was to set a limit to the deficit of the country, with the limit set by the Treat on the Functioning of the European Union at 60% of the GDP(3). Although these goals are set within the Constitution, the actual amount of government debt as percentage of GDP continues to climb at around 10% per year. In 2011, the year when this amendment was passed, the debt as percent of GDP was 60.1%, in 2014 it has climbed to 92.1% of GDP(2). Even if the provision gives some time before the limits take official effect, the trend of the economy suggests that the 60% limit will not be feasible within the next 6 years(1)(4).
The second reason to be skeptical of the effectiveness of amending the Constitution with a budgetary amendment is that the wording of the Article 135 allows for exceptions to the budgeting limit based on an absolute majority vote. Article 135.4 states that “The limits of the structural deficit and public debt volume may be exceeded only in case of natural disasters, economic recession or extraordinary emergency […] as appreciated by an absolute majority of the members of the Congress of Deputies”(1). The term “extraordinary situation” is a vague term that can be interpreted in a number of ways, rendering it possible for exceptions to the amendment to be made on almost any ground. Furthermore, the hurdle that must be crossed in order to meet this requirement is that an absolute majority in the Congress of Deputies approves of it which is a hurdle so low that the People’s Party could currently reach it by itself(5).
1. Abad, Jose. “Spanish Constitutional Reform” 2011. http://aei.pitt.edu/32483/1/PB_253_Abad_and_Hernandez_on_Spanish_constitutional_reform.pdf
2. TradingEconomics “Spain Government Debt to GDP 1980-2014”. http://www.tradingeconomics.com/spain/government-debt-to-gdp
3. EFE. “Spain's king signs deficit-capping constitutional amendment” 2011. http://latino.foxnews.com/latino/politics/2011/09/27/spains-king-signs-deficit-capping-constitutional-amendment/
4. The Local Spain Edition “Spanish public debt tops €1 trillion-mark” 2014. http://www.thelocal.es/20140814/spanish-public-debt-tops-trillion-euro-mark
5. Spain Congress of Deputies. http://en.wikipedia.org/wiki/Congress_of_Deputies_%28Spain%29
As most of what could be said about the 2011 amendment to the Spanish Constitution has already been said, I will focus on the only other amendment made, the 1992 amendment that made possible the ratification of the Maastricht Treaty, with the eventual goal of adopting the Euro and closer ties to Europe (2).
ReplyDeleteThe 1992 amendment did not fundamentally change Spanish politics, but as stated earlier, was a precondition to allow the passage of the Maastricht Treaty. Whereas the previous article stated that only Spaniards could take part in elections, Article 13 was changed to allow the passive participation of foreigners in Spanish elections (1).
The overarching theme was greater economic and political ties within Europe, something the Maastricht Treaty attempted to strengthen (3). The Maastricht Treaty set in place the financial regulations that would lead to the adoption of the Euro as the European Union's official currency. Although the Maastricht Treaty dealt with financial regulations, the greater political ties outlined in the amendment, where national public debt cannot exceed 60% of the annual GDP, and the national deficit cannot exceed 3% of the GDP, something agreed to in the Maastricht Treaty that was not formally incorporated into the Spanish Constitution until the 2011 amendment (4).
As mentioned in my previous blog post, amending the Spanish Constitution is taboo among Spanish lawmakers because of the difficulty the framers had in agreeing upon a text (2). Therefore, the only two amendments that have been made deal with external affairs, or because they were mandated by the European Union.
(1) Gobierno de España. Constitución Española.
https://www.boe.es/buscar/act.php?id=BOE-A-1978-31229&b=17&tn=1&p=19920828#a13
(2) Comella, Víctor Ferreres. "Amending the National Constitutions to
Save the Euro: Is This the Right Strategy?" Texas International Law Journal. http://www.tilj.org/content/journal/48/num2/Ferreres223.pdf
(3) Maastricht Treaty, Wikipedia.
http://en.wikipedia.org/wiki/Maastricht_Treaty
(4) Abad, José M. and Hernández Galante, Javier. Spanish Constitution Reform: What is seen and what is not seen. CEPS Policy Brief.
http://aei.pitt.edu/32483/1/PB_253_Abad_and_Hernandez_on_Spanish_constitutional_reform.pdf
To corroborate the argument introduced by Blake, the 2011 amendment to the Spanish Constitution is the only real major change to the document when comparing it to the 1992 amendment. While Taiki brings up an excellent point that Spain has not explicitly followed the main premise of the amendment, which was to curb spending, this explicit provision of requiring a balanced budget still remains an important provision to have within the context of Spain’s future economic policies and the roots of its government institutions dating back to their inception when the constitution was first ratified in 1978.
ReplyDeleteAs stated above, the amendment imposes a debt ceiling on the absolute level of the general government debt (1). Because of Spain’s membership within the European Union, the limit is based on the EU’s reference value, which is set at 60 percent of GDP. Taiki provided very good evidence that the recent trend of Spanish governmental debt has shown a significant increase rather than a decrease since the amendment’s passage—from 60.1 percent in 2011 to 92.1 percent in 2014 (2). While one can make the argument that this is indicative of not explicitly following the goals set by the amendment, it is important to note that most countries within the EU also have “government debt to GDP” percentages well above the 60 percent reference value stipulated by the EU, specifically the countries with the larger economies within the union. Both France and the United Kingdom have theirs set at 92.2 and 90.6 respectively (2). In fact, most countries within the EU are around the 90.9 area. This indicates that government spending has been a prevalent issue for the EU, not just Spain.
The debt ceiling will not formally take into effect until 2020 (1), so Spain is technically fine in the sense of still hashing out its internal economic reforms to cater to the amendment’s primary effect. However, Taiki’s point that a reduction from 92.1 to the reference value of 60.1 being not feasible in less than six years is a valid one. While this may be the case, I offer that the amendment still poses as an important standard to have within the political institutions provided by the constitution. After all, the amendment was proposed as the result of countless criticisms from various European leaders regarding the history of Spain’s lack of a strong deficit management policy as Blake mentioned. Most countries have balanced budget provisions, so it was feasible for Spain to join the fray. More importantly, the amendment just adds to the already specific nature of the constitution as a whole.
1.http://aei.pitt.edu/32483/1/PB_253_Abad_and_Hernandez_on_Spanish_constitutional_reform.pdf
2. http://www.tradingeconomics.com/spain/government-debt-to-gdp