Spain's Sanchez Lays Down Budget Challenge in Bid to Keep Power

(Bloomberg) -- Spanish Prime Minister Pedro Sanchez fired off an opening salvo in what are likely to be high-stakes budget negotiations, hiking social spending to pressure lawmakers to support his plan and ensure he can remain in office through 2020.

The Socialist leader is looking at a more sober economic outlook than when he became premier in June. That gives him less ammunition to horse trade with lawmakers and win approval for the bill, which will be sent to the lower house of parliament on Monday.

As it stands, Sanchez doesn’t have enough support in Parliament for the budget and if he fails to get it passed there’ll be pressure to call a snap election. Lawmakers will probably start haggling over the spending program next month and negotiations could stretch on for weeks.

The fiscal plan, approved by the cabinet on Friday, is aimed at brandishing his government’s leftist credentials. It would funnel increased corporate and income taxes on high earners into social spending and pensions, and boost infrastructure spending by 40 percent. But some economists say the government’s revenue projections look optimistic.

Despite slower economic growth, Economy Minister Nadia Calvino said the government expects to keep whittling down its debt load, which has spiked in the past decade. The debt-to-GDP ratio may decline to 95.4 percent this year from from 96.9 percent in 2018.

She also said Spain may issue about 35 billion euros ($40 billion) in net debt this year, similar to last year’s issuance. More details will be provided on Tuesday.

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint

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