Rising military spending hampers 2025 budget negotiations

The negotiation of Spain's 2025 State Budget has faced numerous obstacles, from lack of commitment within the government coalition to tensions with parliamentary allies. Despite some preliminary discussions, there has been no genuine attempt to reach an agreement, either within the PSOE-Sumar coalition or with other partners. The recent internal conflict caused by President Pedro Sánchez’s defense rearmament plans may have finally derailed the approval of the budget, which has become increasingly unlikely with time.

The Moncloa government has avoided openly acknowledging what would be its second consecutive failure to approve a budget. However, it seems highly improbable that any budget would be passed at this point, as even if presented now, it would only have a validity of about six months due to the lengthy parliamentary processing. In fact, some members of the government have admitted that approval is almost impossible. For instance, in late March, Minister of Education and government spokesperson Pilar Alegría stated that presenting a budget proposal that would not receive support in Congress would be “a waste of time,” even though the Constitution mandates its submission.

Alegría had to retract her statement soon after, and just recently, President Sánchez reaffirmed Spain's commitment to presenting the budget, promising to work discreetly with parliamentary groups to move it forward. However, little progress has been made, and neither the parliamentary allies nor government sources show optimism about any change.

The problem goes beyond scheduling. Relations with Junts have faced serious setbacks in recent months, but they are now in a more stable phase. However, the situation is complicated by a sudden shift in defense policy, which has caused friction with left-wing partners in Congress (ERC, EH Bildu, Podemos, and BNG) and sparked internal tensions within the coalition. The controversy surrounding a defense contract for the purchase of ammunition from Israel has led to the cancellation of the deal, but mistrust within the government persists. Presenting a budget would inevitably revive these tensions, as it would include a drastic 10 billion euro increase in the defense budget, aiming to meet NATO's target of 2% of GDP in military spending—a figure that Sumar strongly opposes.

In response to these issues, Sánchez has maneuvered to avoid putting his rearmament plan before Congress. Through various accounting measures, the Ministry of Finance has managed to allocate 10 billion euros from existing budgetary allocations, thus bypassing the need for parliamentary approval. Sánchez wants to avoid the political costs of a parliamentary debate, as presenting the plan to Congress would likely require support from the PP, which could either block it or approve it, further straining relations with left-wing allies.

The problem for Sánchez is that this complex scenario seems to have no clear resolution in sight. According to the Constitution, the Ministry of Finance must present the 2026 budget before October 1st. If they do so, the proposal would have to reflect the increased defense investment already announced, as NATO is considering raising the military spending target to 3% of GDP, up from the current 2%. This would be unacceptable to left-wing parties like IU, ERC, EH Bildu, Podemos, and BNG, which means the future of the budget remains uncertain.