Admittedly, prior to the presentation of the State Budget, Parliament and the Senate have approved the budget targets, both for overall general government and for each of its sub-sectors, on the proposal of the Government and following a report by the Fiscal and Financial Policy Council and the Local Government National Board. Yet clearly the budgets of each regional government and each municipality are approved separately, there being no document containing information on all of them, together with that on the State and Social Security Budget. Hence, although we do have ex-post information that enables the public spending outcomes and outturn for the four major spending groups – central, regional and local government, and the Social Security system – to be analysed, we do not have an ex-ante or prior document that provides a detailed analysis of budgetary projections for overall general government and its compatibility with the objectives set. It should be recalled, however, that the new Budgetary Stability Law introduced substantial improvements in this respect. Specifically, it stipulates that, before 1 October each year, regional and local government shall submit information on the essential items contained in their forthcoming budgets to the Ministry of Finance and General Government. Then, before 15 October, the Ministry of Finance and General Government will release a report on the alignment of this budgetary information with the stability objectives, in such a way that the Ministry may make recommendations should it perceive slippage.
The projected tax revenue for 2013 is subject to downside risks because it is based on the assumption that the revenue targets for 2012 will be achieved. However, on the information currently available, it cannot be ruled out that revenue performs worse than expected in 2012. If this risk materialises and is not countered by appropriate action in the remainder of the year, that would make it difficult to achieve the targets set for 2013, compounding the possible effects of a bigger decline in GDP than that assumed in the budgetary programming. Expenditure On the expenditure side, the weight of three items should first be underlined: Social Security system contributory pensions, unemployment benefits and the interest on government debt. In 2012, these three items are equivalent to 20% of GDP and will account for approximately 36% of total public spending. In 2013, these percentages will foreseeably increase significantly. 6  BIS central bankers’ speeches  Noteworthy among the measures considered on the expenditure side are: the freezing of civil servants’ and public-sector employees’ salaries, although they will recover their December extra payroll, which, together with not filling vacancies, will result in a very low increase in personnel costs in relation to serving employees of around 0.1%. Real investments are reduced by 46%, whereas the interest burden increases by more than € billion. In the Social Security system, spending on contributory pensions, sickness and other benefits will grow by slightly more than 5%, factoring in the raising of pensions by 1%.