Spain records first primary surplus in 18 years

Spain has confirmed to the European Commission that it met its fiscal commitments in 2025 under the Medium-Term Fiscal Structural Plan, recording a net primary spending growth of 4.5 percent within permitted limits and achieving a primary surplus for the first time in 18 years. The country's debt-to-GDP ratio is projected to fall below 100 percent in 2026 for the first time since 2019, reaching 99.3 percent and moving ahead of the government's own timeline. Spain also announced it reached the NATO-mandated 2 percent of GDP in defense spending last year, fulfilling a commitment made in 2014, while maintaining a 3.5-billion-euro buffer that could be used to expand economic protections amid uncertainty from the Iran conflict, which could reduce GDP growth by 0.1 to 0.8 percentage points and push inflation up by one percentage point. Meanwhile, Brazil faces mounting pressure on its fiscal framework as government expenses reached 2.44 trillion reais in 2025, with real spending growth projected at 7 percent for 2026, nearly three times the 2.5 percent ceiling established by the fiscal framework law. The surge is driven primarily by pension expenses rising 7.6 percent and public servant costs increasing nearly 12 percent, forcing the government to compress discretionary spending on infrastructure, education grants, environmental enforcement, and public universities. The Independent Fiscal Institution linked to the Senate estimates approximately 250 billion reais in spending will fall outside the fiscal framework limits this year, raising concerns that the continuous use of exceptions could weaken the rules and reduce predictability in fiscal policy execution.