Spain's fiscal policy progress but more consolidation needed

While the pace of fiscal consolidation over the past six years has been one of the most rapid on record, fiscal consolidation in Spain has eased since 2014, similar to other euro area countries. In 2015, the change in the structural fiscal balance is turning slightly accommodative as the macroeconomic and financial backdrop is improving. 

The average funding cost on year-to-date public debt has dropped to 0.9% (with an average maturity of nine years) and the economy is rebounding more strongly than expected. In an electoral year, the regional and central governments are choosing to take advantage of these tailwinds to add to domestic demand rather than increasing public savings. 

However, public debt is approaching 100% of GDP by the end of the year and the primary balance is still in deficit. It is believed that fiscal policy will remain a key challenge for the next government.