The AIReF forecasts that public debt will fall below 100% of GDP for the first time since the pandemic

The Medium-Term Fiscal and Structural Plan (PFEMP) 2025‑2028 of Spain is governed by the new EU economic governance and follows a two-level cycle: one multiannual (a 4-year plan extendable to 7) and another annual monitoring. The plan is prepared at least every four years, sent to the European Commission, evaluated, and then executed through the annual budgets and the spending rule. Formal monitoring is structured through an Annual Progress Report that Spain must send to Brussels before April 30 each year, complemented by AIReF reports and national debates. In parallel, the national framework is adapted through the reform of the fiscal framework and coordination with Autonomous Communities and local entities.

1. Preparation and approval of the medium-term Plan

In the new European framework (Regulation (EU) 2024/1263), the medium-term structural fiscal plans are the central piece: they must set a path for net primary expenditure, debt and deficit targets, and a coherent package of reforms and investments during an “adjustment period” of at least 4 years, extendable up to 7 years if additional reforms and investments are justified, especially with impact on debt sustainability and potential growth, as explained by the European Commission in its May 2024 Q&A note (Q&A 24/2391).

Spain presented its first PFEMP in October 2024 for the period 2025‑2028, effectively extending the fiscal path until 2031, with an average growth rate of net primary expenditure of 3.4% in 2025‑2028 and 3% over the 7-year horizon, according to the Ministry of Economy (note of 15/10/2024) and the official plan documentation (summary, full document, version sent to the Commission, transparency sheet).

The plan replaces the old Stability Programme as the main fiscal planning document, something emphasized by both the Ministry of Finance (official information) and AIReF in its specific report (PFEMP 2025‑2028 report). The European Commission and the ECOFIN Council have validated Spain’s spending path, supporting the seven-year consolidation framework and the combination of adjustments, reforms, and investments, as reported by the Government (note on validation) and various reports such as Servimedia.

2. Implementation: integration into Budgets and national rules

In practice, implementation is done year by year through the General State Budgets and the budgets of other administrations, which must be consistent with the PFEMP’s net spending path. AIReF reminds that the PFEMP is now the central reference framework and that its success requires translating it into the “national reality” through a reform of the Spanish fiscal framework and credible medium-term planning (statements by Cristina Herrero; 2024 conference).

According to AIReF itself, the operative control variable becomes the net primary expenditure of discretionary revenue measures, and a progressive alignment of the national spending rule with this European reference is required (critical analysis of the plan; explanatory view in “What is the structural fiscal plan and why should you care?”). Additionally, the Government has linked the PFEMP to the budgetary roadmap described by specialized press, as reported by El Demócrata.

3. Annual monitoring: deadlines and contents

Formal monitoring is structured in three main layers:

a) Annual Progress Report to Brussels (each April)
The European framework requires each Member State to send, no later than April 30 each year, an Annual Progress Report detailing the degree of compliance with the spending path, the reforms and investments planned in the plan, as well as the most recent macroeconomic developments. The Government recalls this requirement in the April 30, 2026 statement, when it sends the report corresponding to the PFEMP presented in 2024 (“The Government confirms compliance with European fiscal rules in 2025”). The Commission uses these reports, along with its spring forecasts, to evaluate plan execution, as detailed in the 2026 spring package (Q&A 26/1141).

b) AIReF evaluation (annual and by subsectors)
AIReF has a legal mandate to report on the PFEMP and assess the Annual Progress Report. It has already issued a first report on the 2025‑2028 plan (PFEMP report) and, in May 2026, a second report specifically on the Annual Progress Report, complemented with individualized analyses for each autonomous community (2026 monitoring by Autonomous Communities). In these documents, AIReF contrasts the committed spending path with its own deficit and debt projections and may make recommendations.

c) European review and possible plan adjustments
According to the new European regulation, plans have a permanent vocation during the adjustment period but may be revised under justified circumstances (government changes, economic shocks, etc.), subject to Commission evaluation, as stated in the community documentation on governance reform (Q&A 24/2391; Q&A 2024 spring package). By 2025 all Member States already had their plan, and the Commission is using annual status reports and Eurostat data to assess compliance (Q&A 26/1141).

4. Overall time horizon

In Spain’s case, the current schedule can be summarized as follows: the PFEMP 2025‑2028, with an extended horizon to 2031, guides fiscal policy; its execution is updated annually through the Annual Progress Report (sent before April 30) and AIReF reports; and around 2028‑2029, Spain must approve a new medium-term plan to take over for the following years. Meanwhile, the Government and AIReF are also working on a reform of the national fiscal framework to adapt the spending rule and the system of targets to the new European environment (announcement of opinion on national framework reform; debt observatory).

The Independent Authority for Fiscal Responsibility (AIReF) is an independent administrative authority, of public law and with its own legal personality, created by Organic Law 6/2013, of November 14. Its central mission is to guarantee the effective compliance with the budgetary stability principle of article 135 of the Constitution, through continuous evaluation of the budget cycle, public debt, and macroeconomic forecasts. These functions are developed and specified in its Organic Statute, approved by Royal Decree 215/2014, amended by Royal Decree 793/2021, and have been expanded regarding expenditure evaluation by Law 27/2022, on institutionalization of public policy evaluation. Below is a summary of its competencies by major functional blocks.

1. Fiscal supervision and budgetary stability

Organic Law 6/2013 configures AIReF as guarantor of compliance with the budgetary stability and financial sustainability principle, in line with Organic Law 2/2012. To this end, AIReF performs continuous evaluation of the budget cycle, public debt, and economic forecasts of all Administrations included in article 2 of that law.

Among its key supervisory functions are, according to Organic Law 6/2013 and its statutory development (chapter II of the Statute): supervision of macroeconomic forecasts incorporated into budget projects and the Stability Programme, analysis of budget execution, public debt and the spending rule, and reports on individual stability targets for autonomous communities and, in general, on compliance with fiscal rules. It may also report on the advisability of activating preventive, corrective, and coercive measures of Organic Law 2/2012 and on the occurrence of “exceptional circumstances”.

2. Evaluation of expenditure and public policies (spending reviews)

AIReF’s Statute foresees conducting studies and analyses at the request of the Government, the Fiscal and Financial Policy Council, the National Local Administration Commission, and the Social Security Financial Commission, as well as, in certain cases, autonomous communities and local entities. These studies include sectoral or cross-cutting public expenditure reviews.

Law 27/2022, of December 20, explicitly highlights AIReF’s experience in ex post spending review evaluations and recognizes the commitment, linked to the Recovery Plan, to “give continuity and permanence to spending review exercises by creating a permanent spending evaluation division within AIReF”. Thus, expenditure evaluation becomes a structural competence, linked to a broader public policy evaluation approach.

3. Advisory functions and mandatory or optional reports

AIReF exercises its functions mainly through reports, opinions, and studies (Organic Law 6/2013). The Statute details a list of mandatory reports: report on macroeconomic forecasts, report on the Stability Programme, annual report on budget execution, debt and spending rule, reports on economic-financial plans and rebalancing plans, and on fundamental projects and budget lines of Public Administrations.

Additionally, it may issue opinions on its own initiative on matters foreseen in the law. Reports are binding in terms of “comply or explain”: if the Administration departs from its recommendations, it must justify it and include the report in the file. Opinions, however, do not require justification when there is disagreement. Studies may be both at the request of the aforementioned institutions and, in some cases, other administrations, always within its competence scope.

4. Access to information and inter-administrative relations

Organic Law 6/2013 recognizes AIReF’s right to access all economic-financial information necessary for the performance of its functions. Access is preferably through the Ministry of Finance, but it may request information directly from any administration when the provided information is insufficient, incomplete, or requires clarifications.

Subjects included in the law are obliged to cooperate and provide information within the deadline set by the Authority; serious or repeated non-compliance may entail, after public warning on AIReF’s website, the application of measures provided in article 20 of Organic Law 2/2012. The Statute also foresees collaboration with European Union institutions and bodies and cooperation with other independent fiscal authorities of Member States.

5. Organizational and planning powers

The Organic Statute, amended by Royal Decree 793/2021, regulates internal organization (President, divisions, steering committee, and staff), as well as budgetary, patrimonial, and contracting regime. In the first quarter of each year, AIReF must approve and publish a Plan of Actions that includes mandatory reports and requested studies, along with a schedule for information submission by Public Administrations.

The institution has its own budget, independent assets, and financial resources mainly from a supervision, analysis, advisory, and fiscal policy monitoring fee, developed by regulation through Order HAC/1418/2025, in addition to allocations in the General State Budgets. It also has a specific electronic headquarters, created by Resolution of November 13, 2015.

6. Other relevant functions

AIReF must annually prepare a report of activities, widely publicized, and is subject to specific parliamentary control provided in Organic Law 6/2013 and its Statute. Its reports, opinions, and studies are published on its website within a very short time, reinforcing principles of transparency and accountability.

The Statute also foresees periodic independent external evaluations on AIReF’s functioning, whose recommendations are also subject to the “comply or explain” principle. Overall, the regulatory framework — Organic Law 6/2013, Statute approved by Royal Decree 215/2014 and its erratum by resolution of May 1, 2014, its subsequent amendments, and Law 27/2022— configures AIReF as a central institution in fiscal governance and in the evaluation of expenditure and public policies in Spain.

Public debt control in Spain is structured on a dual pillar: European fiscal rules (Fiscal Pact and Stability and Growth Pact) and their transposition into the Constitution and the Organic Law on Budgetary Stability. Internally, the core is article 135 of the Constitution, developed by Organic Law 2/2012, complemented by reforms and specific regulation of commercial debt. Alongside this, there are rules organizing fiscal supervision (AIReF) and the quality of macroeconomic forecasts. This framework sets deficit and debt limits, automatic correction mechanisms, and financial oversight tools over autonomous communities and local entities.

Applicable European framework for Spain

Stability and Growth Pact

The Stability and Growth Pact is repeatedly cited as a reference for European fiscal rules in the reform of article 135 of the Constitution and in the organic laws on stability and debt control. The constitutional reform states that the Pact aims to “prevent the occurrence of an excessive budget deficit in the euro area,” providing confidence in economic stability and ensuring sustained convergence of Member States’ economies, which justifies its reception into domestic law (reform of article 135 CE).

This European framework is constantly reflected in Organic Law 2/2012, whose preamble highlights that Spain incorporates “the European economic governance package” and that reference to European stability regulation is continuous. Moreover, the Law itself foresees the internal distribution of deficit and debt limits set at the EU level and correction mechanisms when those limits are exceeded.

Treaty on Stability, Coordination and Governance (Fiscal Pact)

The so-called “Fiscal Pact” is incorporated into Spanish law through Organic Law 3/2012, which authorizes ratification of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). Its preamble details three key elements:

– A budgetary pact obliging States to record balance or surplus in their accounts, considered as such when the annual structural balance reaches the medium-term objective, with a maximum limit of 0.5% of GDP, extendable to 1% if the debt ratio is below 60% of GDP and sustainability risk is low.
– The articulation of automatic correction mechanisms in case of significant deviations.
– Additional obligations, such as reporting on public debt issuance plans and submitting economic and budgetary partnership programs for States subject to excessive deficit procedures.

The same Law emphasizes that these rules should preferably be incorporated at constitutional level and that non-compliance may be justiciable before the Court of Justice of the European Union.

Directive on budgetary frameworks

Organic Law 2/2012 also integrates Directive 2011/85/EU on requirements applicable to national budgetary frameworks. Its preamble indicates that this Directive inspires transparency measures (prior information on fundamental budget lines) and medium-term planning (multiannual budgetary framework), which are required of all public administrations.

Internal constitutional and legal framework

Article 135 of the Spanish Constitution

The reform of article 135 CE, approved in 2011, is the internal cornerstone. It establishes that:

– All Public Administrations “shall adjust their actions to the principle of budgetary stability.”
– The State and autonomous communities may not incur a structural deficit exceeding the margins set by the EU; an organic law will set the maximum structural deficit.
– Local entities must present budgetary balance.
– The total public debt of all Administrations “may not exceed the reference value established in the Treaty on the Functioning of the EU.”
– Payment of interest and principal on debt has absolute priority in budgets (reform of art. 135 CE).

Organic Law 2/2012 on Budgetary Stability and Financial Sustainability

In development of article 135, Organic Law 2/2012 defines:

– Budgetary stability as a situation of structural balance or surplus of administrations.
– Financial sustainability as the capacity to finance present and future spending commitments within deficit, public debt, and commercial debt delinquency limits; commercial debt sustainability is considered when the average payment period does not exceed the maximum term of delinquency regulations.
– Procedures for setting deficit and debt targets for each subsector (State, autonomous communities, local corporations, and Social Security) and the adjustment path until 2020.
– A system of preventive, corrective, and coercive measures (economic-financial plans, credit unavailability, deposits, possible measures under art. 155 CE, etc.) to guarantee compliance, as detailed in its preamble.
– Responsibility of each administration in case of non-compliance with EU commitments.

The Law has been amended by Organic Law 4/2012 and Organic Law 1/2016, which add additional provisions but maintain the basic scheme. The Constitutional Court upheld its constitutionality in STC 215/2014.

Control of commercial debt and public delinquency

Organic Law 9/2013 expands the concept of financial sustainability to expressly include control of public sector commercial debt. It introduces the average payment period to suppliers as a key indicator, whose publication is mandatory for all administrations, and links its non-compliance to automatic adjustment measures, since high commercial debt endangers budgetary stability and public finance sustainability.

Supervisory bodies and development rules

The control system is completed with:

– The Independent Authority for Fiscal Responsibility (AIReF), regulated by Royal Decree 215/2014, whose statute has been amended by Royal Decree 793/2021. AIReF supervises compliance with fiscal rules derived from LO 2/2012 and European regulations.
– Royal Decree 337/2018, which regulates requirements for macroeconomic and budgetary forecasts, in line with European demands.
– Support and financial conditioning instruments for autonomous communities and local entities, such as Royal Decree-law 17/2014, which links access to extraordinary liquidity mechanisms to compliance with stability and debt targets set by LO 2/2012.

Finally, the annual management of State debt is specified in provisions such as Order ECM/2/2026, which authorizes the creation of State debt, although without altering the limit and control rules, which remain at the constitutional, organic, and European levels described.