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PSG Inception Report National Programme for Turkey 2010 under the Instrument for Pre-Accession Assistance This project is co-financed by the European Union and the Republic of Turkey TR2010/0136.01-01/001- Technical Assistance for Improved Strategic Management Capacity Spain Country Report Additional Activity related to A2.3 28.12.2014 Country Report - Spain 02 This project is co-financed by the European Union and the Republic of Turkey T Contents List of Abbreviations _________________________________________ 3 1 INTRODUCTORY COUNTRY INFORMATION ___________________ 4 1.1 Basic geographic and demographic information ________________________ 4 1.2 Overall information on the Economy, financial and budgetary situation ______ 5 2 GOVERNMENT STRUCTURE AND PUBLIC ADMINISTRATION REFORM TRENDS____________________________________________________ 7 2.1 Constitutional institutions, Central Government and its Administration ______ 7 2.2 Intergovernmental relation: distribution of competences, and cooperation among levels of government _____________________________________________________ 9 2.3 Changes in the Public Spending structure after political decentralization ___ 14 2.4 Public management reform trends in Central Government ______________ 15 2.5 Key issues, lessons learnt and recommendations _____________________ 23 3 PLANNING, PROGRAMING, AND BUDGETING REFORM ________ 27 3.1 Introduction ___________________________________________________ 27 3.2 Brief review of PPB from 1970 to 2000 ______________________________ 28 3.3 Planning and Performance Budgeting in the 2000s ____________________ 30 3.4 Assessment of the program budget reform __________________________ 48 4 KEY ISSUES, LESSONS LEARNT AND RECOMMENDATIONS FOR THE DEVELOPMENT OF PLANNING AND PROGRAM BUDGET REFORM _ 51 4.1 Lessons learnt on Planning ______________________________________ 51 4.2 Lessons learnt on Program Budgeting ______________________________ 52 5 CONCLUSION AND RECOMMENDATIONS FOR EFFECTIVE CHANGE WITH PB REFORM _______________________________________________ 57 References ________________________________________________ 62 ANNEXES _________________________________________________ 64 Annex 1. Sample of a program presented in the Central Government Budget for 2014 64 Annex 2. Summary table of Recommendations for improving Spanish reforms __ 69 Country Report - Spain 03 This project is co-financed by the European Union and the Republic of Turkey T List of Abbreviations AEVAL: Spanish Evaluation Agency. CORA: Commission for the Reform of the Public Administration NRP: National Reform Plans OECD: Organization for Economic Cooperation and Development TC: Court of Audit Country Report - Spain 04 This project is co-financed by the European Union and the Republic of Turkey T 1 INTRODUCTORY COUNTRY INFORMATION 1.1 Basic geographic and demographic information The total area of Spain is 504,782 km2. Its population is 46.704314 (estimate for 2013). This means a reduction of about 110000 inhabitants in relation to 2011 census (46,815,916). The main reason behind this reduction is the return of immigrants to their countries due to the economic crisis. In 2011 there were 5.7 million foreign residents in Spain (12% of the total population). The density of the country is 92 inhabitants per km2. The territory is divided in 17 Regional Governments also called Self-governing Communities (“Comunidades Autonomas”), 2 self-governing cities, 50 provinces and more than 8119 municipalities. Map of Spain and its Comunidades Autonomas Country Report - Spain 05 This project is co-financed by the European Union and the Republic of Turkey T 1.2 Overall information on the Economy, financial and budgetary situation The burst of a housing-market bubble in 2008 and other economic structural weaknesses meant that the Global Financial Crisis (GFC) hit Spain hard and made through out of government to the socialist party (PSOE). The conservative Popular Party won the November 2011 general election and has since introduced the largest budget deficit–reduction in recent Spain’s history. Good progress has been made toward the EU standard of 3 percent of GDP, although the government is not there yet. In 2012, Spain received a €41 billion loan from the EU to bail out its banking sector. In 2014, Spain appears to have pulled out of its recession, but growth remains low. The recession in Spain has been prolonged for six years now. GDP contracted by 3.7% in 2009, ending a 16-year growth trend, and continued contracting through most of 2013. Economic growth resumed in late 2013, although only modestly, as credit contraction in the private sector, fiscal austerity, and high unemployment continued to weigh on domestic consumption and investment. However, exports (particularly tourism) have been resilient throughout the economic downturn, partially offsetting declines in domestic consumption and helped to bring Spain's current account into surplus in 2013 for the first time since 1986. Basic performance indicators Indicator Value* (14 Nov. 2014) GDP (purchasing power parity): $1.049181 Million € GDP Rate of growth 0,5 % Unemployment rate: 24% Budget surplus (+) or deficit (-): 6.8% of GDP (2013) Public debt: 92,1 of GDP (2013) Inflation rate (consumer prices): - 0,2% *(Eurostat News release Euroindicators, 14 November 2014) In a recent report of the Bank of Spain (12-Sept-2014) the public debt in Spain represents a 98.4% of the GDP (Banco de Epaña, 2014). Unemployment rate rose from a low of about 8% in 2007 to more than 26% in 2013, straining Spain's public finances as spending on social benefits increased while tax revenues fell. Country Report - Spain 06 This project is co-financed by the European Union and the Republic of Turkey T Spain’s budget deficit peaked at 11.4% of GDP in 2009. Spain gradually reduced the deficit to just under 7% of GDP in 2013, slightly above the 6.5% target negotiated between Spain and the EU. The estimated deficit for 2014 is 5.5% Public debt has increased substantially – from 60.1% of GDP in 2010 to 93.4% in 2013. By mid-2014 the public debt has reached the 100% of the GDP. Medium-term fiscal plan (per cent of GDP) Level of 2014 2015 2016 2017 Government General Gov. financial -5.5 -4.2 -2.8 -1.1 balance Central -3.5 -2.9 -2.2 -1.1 government Autonomous -1.0 -0.7 -0.3 0.0 regions Local 0.0 0.0 0.0 0.0 government Social security -1.0 -0.6 -0.3 0.0 administration Source: Government of Spain (2014), Actualización del Programa de Estabilidad 2014-17 (Stability Programme Update). According to a recent report of the OECD (September, 2014), the Spanish economy has returned to moderate growth. This major turnaround reflects decisive reforms to strengthen the banking sector (including a financial sector programme), the European Central Bank’s actions, the improvement of public finance sustainability, with a now somewhat slower pace of fiscal consolidation, and the rationalization of the Administration among many other reforms. Country Report - Spain 07 This project is co-financed by the European Union and the Republic of Turkey T 2 GOVERNMENT STRUCTURE AND PUBLIC ADMINISTRATION REFORM TRENDS 2.1 Constitutional institutions, Central Government and its Administration a) Main Organs of the State Since 1978, Spain is a constitutional monarchy with its territory structured in regional Government with a high degree of political and administrative autonomy. The Head of the State is the King which has no executive role, other than appointing officials, requiring reports of official activities and representing Spain at formal and ceremonial occasions. The king is also the commander in chief of the Spanish Armed Forces. The current king, Felipe VI, has held this position for three months, since 19 June 2014, after his predecessor, Juan Carlos I, abdicated the throne. In case of dispute of interpretation of the Constitution, the final decision is the competence of the Constitutional Court. The legislative power (Las Cortes Generales) has 2 chambers: - The Congress of Deputies, a general assembly of representatives whose controlling party forms an executive government and proposes legislative changes. It has 350 members, elected by popular vote on block lists by proportional representation in constituencies matching the Spanish provinces. Congressmen serve four-year terms. - The Senate, which considers the wider implications and compatibility of proposed legislation. The Senate of Spain is the upper house of Spain's parliament, the Cortes Generales. It is made up of 266 members: 208 elected by popular vote, and 58 appointed by the regional legislatures. All senators serve four-year terms - The Judicial branch is composed of a hierarchy of law courts which ensure that any proposed or imposed executive enforcement complies with Spanish and European law. The executive branch (Council of Ministers) consists of the President, Vice- Presidents, when appropriate, Ministers and other members as may be created by law. The President of the Government (equivalent to “Prime Minister” in other countries) is elected by the Congress of Deputies and leads the Governments’ action and coordinate the functions of the other members, without prejudice to the competence and direct responsibility of the latter in the discharge of their duties. The Country Report - Spain 08 This project is co-financed by the European Union and the Republic of Turkey T Council of Ministers is jointly accountable before the Congress for its conduct of political business. After consultation with the representatives appointed by the political parties, the
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