t was 23.7% of GDP. In 1986, the Spanish public administrations’ spending was roughly 3.5% of GDP, gradually increasing to about 5% of GDP in 1989. In the past decade, however, the figure has remained constant. Also, ever since 1986 the public investment spending in the European Community has been maintained at around 3% of GDP. To set Spain on the right expansionist track as far as the budget goes compared to the rest of the EU, a fiscal policy coordination agreement was constructed in the beginning of 1992. In an attempt to solve the problem of excess demand, a monetary policy which raised interest rates was produced to hinder investment demand was made to slow down the progress of Spain before it went deeper into economic recession. However, a new policy is being created that will force fiscal policy to play a more central role in the restraint of demand, therefore, leading to lower interest rates. The current structure of debt in Spain is quite biased towards the short term, which poses future difficulties for the Treasury financing in the long run. In the last years Spain has been forced to live within its means and state spending has been slashed to control the soaring budget deficit. Like many European countries, Spain has found that it can no longer afford to pay the high social security benefits that its citizens have become accustomed to in the last few decades and this continues to be one of the most pressing concerns of the current government.In modern market economies, progressive taxation and distribution of income in the form of services and benefits through welfare institutions are the two tools which are used to correct social inequalities. Spain was an exception to this rule all the way up until the eighties and made serious economic adjustments. In comparison to the European Community, the tax burden is below average as it has increased from 28.1% to 36.4% since 1986. The current tax system today consi...
