Reform or resist? The tale of two fiscal reforms in Spain after the crisis

This paper examines the two main fiscal reforms that Spain adopted after the global financial crisis: the law on budget stability (2012) and the creation of the country’s first independent fiscal institution: AIReF (2013). The analysis suggests that the Spanish government adopted an ambivalent strategy, displaying tendencies both to reform but also to resist by trying to keep or regain fiscal decision power for itself.This paper analyses the two main fiscal reforms that Spain adopted after global financial crisis: the new law on budget stability (2012) and the creation of AIReF, the country’s first fiscal council (2013). So far, the new law has made only minor progress as a fiscal discipline device, but the central government took the opportunity to regain decision power from periphery administrations. The lesson here is that policy-makers need to be aware of the political side-effects of fiscal reforms. Another lesson, learnt from AIReF’s first years of operation, refers to the importance of establishing mechanisms that safeguard the independence and margin of manoeuvre of fiscal councils. Finally, another relevant finding for policy-makers and academics is that one of the reforms (the creation of the AIReF) helped unveil the limitations of the other reform (the new law). This shows the reforming process is dynamic and complex, and tensions may arise among individual reforms.