S&P warns of a "possible deterioration" of the economic reforms in Spain in the face of "heterogeneity" of the new government

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One of the largest rating agencies in the world, the American Standard & Poor’s, has retraced its steps and describes a complicated future when it comes to advancing the reforms that Spain needs before a Government supported “in a coalition of eight political parties” that add up to a total of 179 seats. “The heterogeneity of the composition of the new Executive means that any member of the coalition, including the smallest, could block the legislatureincluding those critical measures that ensure that debt to GDP remains on the right path,” S&P analysts point out in a report published this Monday.

“Fragmented parliamentary support for the new Government could limit its ability to govern effectively and in a timely manner, and to address longer-term economic problems. Challenges such as budget consolidation, resolving the structural deficit of the Social Security system; the high unemployment rate and the implementation of reforms related to the National Recovery and Resilience Plan,” the experts point out. However, toThey point to the fact that the Socialist Government itself limited its capacity for fiscal maneuver in the face of next year’s Budgets by linking, for example, the revaluation of pensions to the CPI. “It will be very expensive,” they maintain.

On the other hand, in relation to the removal committed by the Executive to Cataloniawhich will forgive 20% of the debt (about 15,000 million euros), S&P analysts recall that the Government could extend this debt reduction to other autonomous communities which, a priori, would have no “impact” on the Spain credit ratings.

The Standard and Poor’s agency was one of the first financial institutions to speak out after the agreements reached between the Socialist Party, ERC and Junts, which includes the Amnesty Law. In his opinion, assuming a cancellation of Catalonia’s public debt implies a “risk” for the rest of the Autonomous Communities since it “disincentivizes” the rest of the regions to comply with the agreement and reduce their debt levels.

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