We are heading towards the final stretch of the decisive 29-N elections, and if the political balance of Sánchez's eight years of presidency turns out to be disastrous, due to the poor management during the pandemic, the disfigurement of the separation of powers that we have witnessed in this unfortunate XV Legislature, the approval and application of an amnesty law that President Sánchez himself, his vice president Calvo, and his Minister of Justice Campos considered completely unconstitutional, the disgraceful pacts with EH Bildu, the condemnation of the Attorney General, the management of the invasion of Ceuta, and, finally, the precarious situation of the real estate market, an excuse to occupy public spaces, call for a general strike against the opposition, and sow violence on the eve of elections, the economic balance is not far behind. It is astonishing that President Sánchez has boasted about the management carried out and even dared to claim that the economy is booming and that we are the fastest-growing country in Europe. Lying and distorting reality are the most esteemed specialties of this Doctor in Economics sine laude.
“Public spending continues to grow and the deficit is 437,073 million in 2019-25. The figure for 2026 is missing, at 41,978 million as of August, more than in all of 2025 (40,641 million)”
When comparing the situation of the Spanish economy in 2018 and 2026, we can see that the size of the population, GDP, and employment have grown at appreciable rates, and the Government believes that it has achieved, therefore, notable if not outstanding economic management. But there is one fact that is simply devastating: nominal GDP has increased by 547.151 billion since the second quarter of 2018 (2028T2) to the second quarter of 2026 (2026T2), and public debt has increased by 559.268.8 billion in that same period, which means that the debt incurred by Public Administrations has risen more than GDP. Despite not having presented the General State Budgets in the three and a half years that the XV Legislature has lasted approximately, public spending has continued to grow, and the accumulated deficit in the period 2019-2025 reached the extraordinary figure of 437.073 billion according to the General Intervention of the State Administration (IGAE). We must also add the deficit corresponding to 2026, which the IGAE itself estimated at 41.978 billion until the end of August, surpassing the 40.641 billion for all of 2025.
One thing cannot be denied to Sánchez's governments: they are earning more than ever and spending lavishly. Perhaps that is why the majority of workers who have seen how the sharp increases in prices and taxes have eroded the purchasing power of their wages do not share the government’s euphoria, unlike the trade unions that supposedly represent them and have seen state subsidies multiply. The situation of young people is particularly delicate, as they look anxiously to a future where they will have to bear high taxes to pay the interest on the debt accumulated over these eight years, the rising cost of pensions and other social benefits, and they sense that they will receive fewer public services and transfers in return and will struggle to rent or buy a home.
The announcements that have emerged during the electoral pre-campaign – a 4.5% increase in public employee salaries, pension revaluation with the CPI, and a new increase in the minimum wage before the elections – will leave the government that succeeds Sánchez in a highly delicate situation. Not only will it have to face ever-increasing debt interest and high inflation, but it will no longer have the resources from the Recovery, Transformation and Resilience Plan, which has injected European funds amounting to 96.185 billion from the second half of 2021 until 31 August 2026. Under these circumstances, heating up the streets with unions and anti-system brigades will be quite easy, and restoring institutional stability seems like a task perhaps more complicated than the transition from dictatorship to democracy, because after the dictator's death, Gonzalez's PSOE and Carrillo's PCE wanted to end the Civil War, and now the PSOE and the organisations to its left are betting on reviving the two Spains.
More Illusory Growth than Real
How much have we grown from the second quarter of 2018 to the second quarter of 2026?
The first rows of Table 1, prepared with data from the Quarterly National Accounts (CNTR) prepared by the INE, show that the accumulated growth of nominal GDP was 45.95% during the exact eight years considered, but when we discount the price increase, 24.99%, the accumulated growth reduces to 14.93%, or approximately 1.75% on average each year. I want to remind you that the CNTR data has been revised following the arrival of Elena Manzanero at the INE, appointed precisely in August 2021 by Vice President Calviño to revise the National Accounting estimates and more specifically to revise upwards the GDP growth rates and lower the price growth, an operation I dubbed in my article “GDP is no longer what it seems” (Consejeros, January 2023) as the “Manzanera effect.”
We can therefore assert that the figures in the CNTR for GDP growth are at best biased upwards and those for price growth downwards. Nevertheless, taking them at face value, the situation is considerably worse than the Government suggests because GDP growth has been accompanied by a population growth of 6.42% between the second quarter of 2018 and the second quarter of 2026. Consequently, GDP per capita has recorded an accumulated growth of 7.99% and an average annual growth of 0.96%. In summary, we can say that we are 8% richer in 2026 than in 2018, not much, and that what has really grown in the Spanish economy are prices. Certainly, it is not something to boast about and celebrate.
Employment and unemployment indicators also show an even more positive evolution than GDP, with growth of 17.91% in the case of Employed persons in the Active Population Survey (EPA) and 18.28% in the case of Affiliated workers to the General Treasury of Social Security (TGSS). Impressive as these figures are, there are other aspects of the labour market that are not so positive. According to the EPA, the number of people employed but not working for various reasons has increased by 1,092,875, with an accumulated growth of 68.93%; that is, those employed who are not working are growing 3.8 times more than the total employed. Being employed without working constitutes an 'innovation' in the Spanish labour market that inflates the figures of employed and increases expenses on benefits of the National Institute of Social Security (INSS) and the State Public Employment Service (SEPE).
“The number of employed people who do not work - an “innovation” - increases by more than one million people. And the figure for those employed in the public sector grows by 530,775 people”
Moreover, the number of employed in the public sector has increased, according to the EPA, by 530,775 people, and Public Administrations have to face the consequent increase in personnel, goods and services expenses, and administrative spaces by taxing workers and companies in the private sector. In the case of affiliation to Social Security, the strong increase in the modality of fixed discontinuous contracts stands out, which also masks the reality of the labour market: there are 594,311 more than in June 2018, with an accumulated growth of 174.99% over eight years. Lastly, it is worth noting the strong increase in the incidence of temporary disability leaves, whose budgetary impact, according to AiREF, on the INSS has risen from 7.485 billion in 2018 to 16.464 billion in 2024, with an accumulated growth of 119.16% over six years, and it would have reached a new peak, 18.410 billion, in 2025.
Another equally concerning aspect of the labour market is the evolution of unemployment because while the figures for Unemployed EPA and Registered Unemployed in Table 1 have recorded falls of 30.37% and 27.52%, respectively, and the number of beneficiaries of unemployment benefits from SEPE has reduced by 6.17%, expenses on benefits have recorded an accumulated increase of 20.05%. One wonders how it is possible that with such pronounced falls in the number of unemployed and such high increases in the figures of employed, the expenses of SEPE and INSS are skyrocketing. Some doctors seem not to have understood the first lesson I learned in my first year of Economics: efficiently allocating resources that are susceptible to alternative uses.
Decline in Productivity
The economic balance of the last eight years is even more negative when we compare GDP growth, 14.93%, with the number of people who generated it: 16.34% in the case of employed persons and 19.74% in the case of full-time equivalent jobs, according to the CNTR; 17.91% in the case of Employed, according to the EPA; and 18.26% in the case of Affiliated to Social Security, according to the TGSS. The inescapable conclusion is that when GDP grows less than employment indicators, the product per worker decreases, and that is exactly what has happened in the Spanish economy between the second quarter of 2018 and the second quarter of 2026. As the reader can see in the section on GDP per capita and productivity indicators in Table 2, the accumulated growth of productivity is negative for almost all employment indicators except for Hours worked, whose accumulated growth, 12.51%, is slightly lower than GDP, 14.93%, although the accumulated increase in productivity over eight years, 2.15%, is insignificant.
When GDP per occupied person grows less than wage increases, these end up being transferred to the costs of companies, increasing the tax burden of social security contributions and pushing up the prices of goods and services, ultimately cutting the purchasing power of net wages and weakening the competitiveness of exporting companies. The average salary and median salary in Table 3 show accumulated growths between 24.92% and 22.01%, respectively, far exceeding the growth of productivity which, as we have just seen, was negative for almost all indicators, so it is not surprising that the growth of prices, well measured by the General Consumer Price Index (CPI), 25.56%, or the implicit GDP deflator, 26.99%, is very similar to the growth of salaries.
“When GDP grows less than employment indicators, output per worker decreases. This is what has happened in Spain”
This means that the majority of workers on average have not seen an increase in the purchasing power of their wages. Only minimum wage recipients have seen their salaries increase by 65.62%, that is, by a multiple of the price increase, 25.56%, and have thus improved their purchasing power. It is also worth noting that the food index has recorded a tremendous increase, 41.74%, 16.18 percentage points above the general index, making it difficult to escape the conclusion that households that receive only wage income and allocate a larger proportion of their income to purchasing food have been hit particularly hard. On the other hand, the accumulated growth of average net incomes and per household from the Living Conditions Survey (ECV) between 2018 and 2025 is significantly higher than the price increase during the period and suggests increases in the real incomes of households, probably benefiting the most those households whose incomes come from self-employment and capital and property incomes.
An Irresponsible Treasury
In my article “Budgets, for what?” published in the June issue of Consejeros, I already presented a total amendment to the budget management of Montero, the Minister of Finance and Sánchez's vice president, and the most powerful woman in democracy, as she herself confessed. Beyond failing to fulfil her constitutional duty to present the General State Budgets and extending those approved in 2023 in this Legislature, having committed accounting tricks denounced by the Court of Auditors, being ultimately responsible for rescues carried out by the State Industrial Participation Service, some of which are under investigation by judges, and having forgiven debt to the Autonomous Communities with ad hoc criteria to blatantly favour Catalonia and maintain the support of Esquerra Republicana de Catalunya in Congress, the most serious aspect of her entire management, in my opinion, is the sustained expansion of public spending and the increase in public debt, as can be seen in Table 4.
The Resources and Non-financial Employments of the Public Administrations grew by 53.66% and 52.29%, respectively, between 2018 and 2025, rates well above the accumulated growth of nominal GDP, 45.95%, between the second quarter of 2018 and the second quarter of 2026. Among the expenditure items, the Public Administrations, Social benefits not in kind with an accumulated growth of 54.33% and various current transfers with 94.11% stand out. The budgetary policy under Sánchez and Montero has served to expand the government's tentacles in society to finance populist policies with a marked electoral character, while accumulating maintenance deficits of public capital: rail, road, hydraulic, and electrical infrastructures.
“The interest bill for the debt has risen from 29.593 billion in 2018 to 40.432 billion in 2025, and it will continue to increase”
Maintaining this budgetary orientation has required imposing increasingly greater burdens on the private sector. The non-financial Resources of the Public Administrations grew by 53.66% between 2018 and 2025, far above the growth of GDP between the second quarter of 2018 and the second quarter of 2026, and the accumulated growth of income taxes stood at 74.91%, 28.96 percentage points above the growth of nominal GDP, 45.95%. However, the budgetary policy of Sánchez's governments has led to deficits year after year and the accumulation of enormous public debt. The accumulated deficit between 2018 and 2025 amounts to 437.373 billion and the accumulated debt between the second quarter of 2018 and the second quarter of 2026 to 559.268.8 billion. On some occasions, we have heard Sánchez boast about having reduced the percentage of debt to GDP, but the truth is that this reduction is mainly due to the increase in prices, not to expenditure containment.
A More than Delicate Future
Sánchez's governments have not only incurred deficits during the pandemic – very poorly managed, as I explained in detail in my book “Covid-19: The Great Disappointment. Some Lessons for Spain and the West” – but they have continued to do so even when the economy was booming and have even allowed the debt to increase by several tens of thousands of euros above what was required to finance the deficit of the Public Administrations. Therefore, the economic situation that the next government will face is quite delicate.
To begin with, the cheerful accumulation of debt is beginning to be felt. The bill for interest has risen from 29.593 billion in 2018 to 40.432 billion in 2025, and it will continue to rise in 2026, and it is more than likely to do so even more in the future if the ECB normalises interest rates (2.5% - 2.65%), now below the inflation rate (3.8%) in the Eurozone. As we have also pointed out in the text, the bill for pensions and other social benefits will continue to increase at rates higher than nominal GDP, and it will also be very difficult to contain the increase in personnel expenses due to the increases in the number of public employees and the revaluation of salaries. Finally, the new government will have to allocate more resources to maintain infrastructures whose deficiencies are becoming more evident and pressing every day, and good proof of this are the two tragic railway accidents that occurred in 2026.
Allow me to summarise with a metaphor the budget management since Sánchez took office, buoyed by independentist parties and populist coalitions on 1 June: despite the frantic efforts of the most powerful dressmaker in democracy to widen the suit, the seams are about to burst apart. Therefore, when I hear some leaders (Feijóo and Abascal) promise to lower taxes, I put my hands to my head because the priorities of the new government should be to contain spending and eliminate the public deficit. Rajoy also promised to lower taxes in 2011 and had to do exactly the opposite in 2012 to avoid a fatal crisis in the debt market: he tightened his belt several notches and raised taxes. The problem is that recognising the seriousness of the Spanish budgetary situation and acting accordingly is not very popular these days: it cost Rajoy a good part of his support at the polls in 2016 and ended up ceding the government to two unscrupulous populists (Pedro and Pablo).