Sustainable Future Fiscal and Debt Policies: Lessons from and for Spain

Abstract The New Consensus Macroeconomics and the consequent macroeconomic policy strategy implemented before the current financial and economic crisis had downgraded the role of fiscal policy. Discretionary fiscal policy should be abandoned, leaving room only for the working of built-in stabilisers. Fiscal deficits had to be avoided, setting strict limits to the circumstances in which this fiscal imbalance could operate and to the maximum size of the fiscal deficit. However, this view has changed since the start of the crisis. Thus, recent research confirms the validity of the Keynesian arguments in favour of an active counter-cyclical fiscal policy and the problems generated by the fiscal austerity policies whose only objective is the drastic fall in fiscal imbalances. The objective of the chapter is to show the main principles and guidelines of what should drive the fiscal policy in Spain in the future.