Spanish Public Finances through the Financial Crisis

Spain's public finances have been under significant stress during the financial crisis, despite pre-crisis fiscal surpluses and low levels of public debt. The impact of the crisis and an initial phase of countercyclical activism exacerbated the existing (structural) fiscal vulnerabilities. To correct the fiscal imbalances, a significant number of bold policy actions were taken, affecting taxation, public spending, national fiscal rules and the structure of the public sector. In this paper, we discuss the evolution of the public finances in Spain through the financial crisis, framing crisis-related fiscal policy measures within medium-term economic trends and focusing on policy responses to the crisis. We also touch upon the main policy challenges ahead.