The Ministry of Treasury convenes the Fiscal and Financial Policy Council on Monday to agree on the path of budgetary stability for the 2027 Budget, with the spectre of December's rejection still looming and the risk premium at 85 basis points.
The Ministry of Treasury has summoned the Fiscal and Financial Policy Council (CPFF) and the National Commission for Local Administration on Monday, July 6, to establish the path of budgetary stability that will serve as a framework for the General State Budgets of 2027. The meeting comes six months after the failure in December 2025, when the Parliament rejected the same procedure. At the opening of the session, the Spanish risk premium stands at 85 basis points, its lowest level since May 2024.
Deficit targets: a replica of the failed proposal from December
According to sources from the Executive, the deficit targets that will be discussed essentially replicate those that were already debated six months ago. It is proposed to reduce the negative balance of the Public Administrations from 2.1% in 2026 to 1.8% in 2027, aiming for 1.6% in 2028. By subsectors, a deficit of 0.1% of GDP would be maintained for the autonomous communities over the three years, with budgetary stability – balance – for the municipalities.
The schedule is tight. If the Council of Ministers approves the spending ceiling and the stability targets on Tuesday, the Congress will vote on them in a special session on July 14. In case of rejection, as happened in December, there would be a second vote on July 23. The legislature has shown that the Executive cannot achieve majorities even with the deficit path, a crucial first step for any Budget.
Risk premium and Spanish bond: fragile stability amid political tension
The sovereign debt market observes the meeting with caution. The yield on the ten-year Spanish bond hovers around 2.4%, with the German bund as a reference at 2.5%, leaving the risk premium at 85 basis points. This is a level that the market had already reached after Moody's update in 2024 – which rated Spain at A3 with a positive outlook – but it still does not discount a scenario of prolonged political blockage.
Recent memory weighs heavily. The failure in December caused a temporary spike in the risk premium to 95 basis points, which was later corrected with the intervention of the State Attorney's Office, which offered the Government a plan B: to use the medium-term structural fiscal plan submitted to Brussels as a distribution basis without needing to go through Parliament. Although this legal route exists, resorting to it after another rejection would convey a signal of weakness that investors would not overlook.
With the 2027 Budgets at stake and Brussels watching, the Government cannot afford another stumble in parliamentary votes.
Uncertain support and the State Attorney's plan B
The main obstacle is not the figures, but the context. The autonomous communities governed by the PP have conditioned their support on Treasury first negotiating the new model of autonomous financing, which will be debated in another CPFF before August. In fact, the popular councillors have not even attended the prior bilateral meetings, and they have indicated that today they will force the conversation to show their outright rejection of the scheme agreed between ERC and the PSC. The mix of deficit and financing turns each vote into a variable geometry contest.
The credibility of the fiscal path does not depend so much on the 1.8% deficit as on who supports it. European fiscal rules are back, and the European Commission will demand accountability starting in September. If the scenario is another parliamentary deadlock and a technical fix through the State Attorney's ruling, the risk premium is unlikely to convincingly drop below 80 basis points; it will move more due to the inertia of the ECB than through genuine confidence in Spanish solvency.
There is a specific milestone: the vote on July 14, which will define the tone of the summer. If it passes, the market can anticipate an expansive but orderly budget; if it fails, uncertainty will stretch until the second vote on July 23, with summer volumes exacerbating any movement in debt. Meanwhile, the risk premium is a step away from its recent historical average, and the differential with Italy – which hovers around 130 basis points – confirms that Spain continues to benefit from preferential treatment in the market, as long as it is not put to the test.
For the investor, the key lies in the behaviour of the ten-year bond: a weekly close below 85 basis points would pave the way to 80 points, while a rejection in Congress that pushes the premium above 92-95 points would invalidate the improvements of recent weeks. The meeting on July 14 is, therefore, the first major test of fiscal credibility of the year.
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