Division in the Government between PSOE and Podemos on the adjustments in the 2021 Budgets

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The 2021 General Budgets still do not have a sketch, but in the midst of negotiations between PSOE and Podemos on their content, sparks are already beginning to jump on what containment or adjustment measures may include: from the possible freezing of the salaries of public employees or the tax rise that will contain. The last to pronounce on the matter was the Minister of Consumption, Alberto Garzón, who warned yesterday in an interview in Onda Madrid that “will be an error” and therefore “It cannot be on the government’s roadmap”, freeze the salary of civil servants.

The head of Consumption warned that it would be “absolutely wrong to speak of social and labor cuts”, in general but above all “at a time like this, in which what must be done is to stimulate the economy by the part of public investment ». Therefore, he believes that “It would be a huge mistake to start a path of cuts in labor, social and public service rights” and that the freezing of salaries for public employees “cannot be on the road map at any time”, but rather that the “progressive” government is responsible for recovering the rights and purchasing power supposedly lost by officials under the previous Executive of the PP.

Economic error

Asked if then he is not in favor of this possibility that the Minister of Finance, María Jesús Montero, did not rule out yesterday, he replied: «No, absolutely, it must be said very clearly». And he insisted that it would be “a mistake from the macroeconomic point of view and from the point of view of social justice.”

Also yesterday morning, the Minister of Inclusion, Social Security and Migration, José Luis Escrivá, left the door open to a possible freeze on the salaries of civil servants. “From a macroeconomic point of view, it is not very relevant as it could be in other circumstances,” he said in an interview with Cadena Cope, since the evolution of prices is being “very contained”, with a fall in the last twelve months of the CPI of 0.5% in August, an expectation of negative inflation for the year and also “very contained” in 2021. A message in which it coincided with the one given, a day before, by the third vice president of Economic Affairs and Telecommunications, Nadia Calviño, at a time when Funcas predicts that inflation this year will be -0.2%, so a freeze would even allow us to gain purchasing power. And after the Minister of Finance, María Jesús Montero, pointed out that it is an option that “must be studied.”

However, this is not the only issue in which the positions of United We Can and PSOE collide in the face of the accounts for 2021. The tax increases agreed between both parties in the Government pact signed at the end of 2019 is another of the fronts. Although, as reported by ABC, the bulk of the tax increase will be postponed, pointing to the increase in Companies, because in the middle of the crisis it is not a good time to raise the tax bill of companies, Podemos does not renounce to increase the tax burden to high rents. The pact included an increase in personal income tax for those who earned more than 130,000 euros, as included in the failed Budget project for 2019. Garzón yesterday reiterated that “the purpose of United We can always has been to raise direct taxes on the sections higher ”and that“ that implies personal income tax ”, a measure that will come“ sooner or later ”.

“I do not have the impression that there are going to be changes at this time,” Escrivá opposed yesterday. The purple formation battles this point, along with taxing large assets more. In exchange for postponing the tax increase throughout the legislature, Podemos aims to achieve more concessions on the spending side, especially social, at a time when, with the 140,000 million loans and transfers coming from Europe, the spending ceiling will skyrocket to an unprecedented level, say sources in the negotiation.


However, in 2021 they will start more adjustments. Both from Podemos and the PSOE agree that they will come from bonuses and deductions, although the differences are in taxes and those affected: the purple formation looks at certain reduced VAT rates.

Escrivá recalled yesterday that the reports of the Tax Authority are being used that evaluated some 60,000 million euros of loss of collection due to these bonuses, in such a way that he indicated that they will be remove tax deductions and benefits. “This is the main reason why Spain has an income level significantly below the EU,” he added.

From Social Security, it is proposed to penalize early retirements with 8% of the pension. As for the revaluation of pensions, Escrivá denied yesterday that there will be a freeze. Of course, if they are linked to IPC, the difference will be small at a time when inflation dives into negative territory. In the middle of the pandemic, the positions of PSOE and Podemos are more distant in the economy than in the rest of the facets.



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