With respect to public spending by the Central Administration, a slightly expansionist growth in State spending was recorded from 1985 to 1990, while growth was neutral, neither expansionist nor restrictive, during the three years from 1990 to 1992.

Non-financial State spending was 21.6% of GDP in 1985, and it rose to 23.2% in 1989, remaining more or less at this level up to 1991 (23.7% of GDP). Nevertheless, when evaluating the expansionist or restrictive character of public spending, the central Administration and the Territorial Administrations must be considered separately, since during the last three years, the spending of the latter has been expansionist, which poses a risk to fulfilment of the objective to reduce the public deficit as stipulated in the Convergence Programme.

To resolve these problems, within the framework of the Territorial Administration's financing reform, a fiscal policy coordination accord was reached at the beginning of 1992 with the Autonomous Communities, in a context of excess demand, with a monetary policy supporting the wighth of the restrictive demand policy and the slightly expansionist public spending, a sharp increase in interest rates was produced which hindered investment demand and mortgaged future growth potential. The correction of this expansionist trend in the Territorial Administrations' spending will permit fiscal policy to play a more central role in the containment of demand, which will lead to lower interest rates.

The evolution of State spending over the ourse of recent years emphasizes the efforts made to increase the economy's competitiveness, by reinforcing public investment in infrastructure, spending in the area of professional training and investment in education.

In 1986, the Spanish public administrations' spending was approximately 3.5% of GDP, and since then, it gradually increased to some 5% of GDP in 1989, a figure which has remained constant in succeeding years. From 1986 to 1992, public investment spending in the European Community has been maintained, on average, at close to 3% of GDP.

Since the level of infrastructure in Spain is appreciably inferior to that in the rest of the Common Market, any attempt towards economic convergence demands more investment in Spain than abroad. In 1988, there were 0.63 kms of roadway per square kilometre compared to 1.98 kms in Germany, 0.025 kms of railway per square kilometre compared to 0.109 km in Germany, and 352 telephones per 1,000 inhabitants, while the corresponding figure for Germany was 570 per 1,000 inhabitants. The differences between Spain and France, Italy or the United Kingdom are also significant.

In this context, the increase in Community structural funds and the creation of the so-called "Cohesion Fund" will help Spain to make the necessary investment, in order to continue to approach the Community's average infrastructure levels.

The 1991 Budget emphasized the sharp growth of tranfer funds which correspond to the increase of spending by the Instituto Nacional del Empleo (National Employment Institute), a result of the rise in unemployment benefits, the increase in umemployment rotation and the existence of certain deficiencies in the management and control of its spending. The remarkably rapid growth recorded in this spending, and the dificit being generated by the unemployment insurance system compelled the Government to ratify a Decree to corect this trend which threatened to bankruptcy the system and hence its very survival. These measures, which were undoubtedly unpopular, not only arrested a pablic spending trend that would have had serious consequences, but also introduced certain reforms in the functioning of the labour market, with a view to promoting active job pursual.

The evolution of public sector income and spending brought about a notable reduction in the public deficit during the years of greatest growth. This trend was broken after 1990 up to 1992, when the public deficit decreased by 4.4% of GDP, compared to the 4.9% rescorded in 1991.

The difficulties experienced in reducing the public administrations' deficit during the years of sharp economic deceleration have also been felt in the rest of the Common Market countries. The financial requirements of the public administrations of the 12 European Community states, on average, were 2.9% of GDP in 1989, compared to the estimated 5.3% for 1992.

The evolution of public debt has been relatively moderate during recent years. In 1986, the level of active public sector debt in Spain was 39.7% of GDP, which rose to 43% in 1990. The corresponding figure for 1992 was approximately 46% of GDP while the European Community average for the same year was 64.2% of GDP. The figure for 1993 was 54.5% of GDP.

The structure of debt in Spain at present is more or less biased towards the short term, which indicates that Treasury financing will not be an easy task. For example, close to 9.4% billion pesetas worth of Treasury bonds matured in 1993, an amount equivalent to 14.9% of the estimated GDP for 1993.