Empire Rising: Spain

Chapter 105: Chapter 96: Fiscal Revenue and Budget

Regarding the government’s development report, Carlo is actually more interested in the financial report of the Spanish Government.

After all, whether it is reform or construction, a lot of Pesseta is needed. If we don’t pay attention to the government’s financial situation, we might not even know when the country goes bankrupt.

Prime Minister Prim actually has a lot to say about the government’s finances.

“Your Majesty, according to the summary of the 1870 financial report from the Ministry of Finance, our economic situation is quite good, and it is expected to maintain relatively stable growth in 1871.” Prim said with a smile, appearing a bit more relaxed when mentioning Spain’s economic situation.

The development of the economy is always interconnected. Although it seems the government has reduced taxes on farmers, once the farmers have money, whether they save it in the bank or spend it, it can stimulate Spain’s financial growth.

Moreover, with various construction projects in Spain, many jobs above the per capita income level have emerged, which have been welcomed by many Spaniards.

Currently, the most popular jobs are those of the steelworkers. Although the work in steel plants is tough, the pay is indeed good.

Just the steel plants integrated by Carlo alone recruited more than 400 workers in one year in 1870, and across Spain, the number will only be more.

As the people become wealthier, their consumption level will naturally and steadily increase. People’s consumption can also stimulate the development of various industries, which will naturally boost Spain’s economy.

If Spain during Queen Isabella’s reign was more like a stagnant pool, then today’s Spain is more like a flowing stream, because the various constructions advocated by the government and the Royal Family are gradually revitalizing the entire economic system.

Carlo nodded, showing an expression of attentive listening.

During this period, just the Royal Family has made quite a bit of money, and surely the government’s financial income should also see considerable growth. After all, the Royal Family has become a major taxpayer for the government, paying taxes of up to millions of Pesseta in 1870.

“According to incomplete statistics, the Gross Domestic Product of our country in 1870 was approximately 6.1828 billion Pesseta, an increase of about 1.5% compared to 1869.

The financial income was about 352.48 million Pesseta, accounting for about 5.7% of the Gross Domestic Product. Our fiscal expenditure reached 412.8 million Pesseta, with a fiscal deficit as high as 60 million Pesseta.

However, due to the issuance of treasury bonds and the war reparations from Morocco, we can barely cover our fiscal deficit.” Prim handed Carlo a detailed report on Spain’s finances, explaining along the way.

Understanding national development is a right of the King, and naturally, Prim would not refuse Carlo’s understanding of the national situation. After all, a King who is indifferent to state affairs is not a good thing.

“A fiscal deficit of 60 million Pesseta?” Carlo felt a bit of a headache. Originally, hearing that Spain’s total financial income reached 352.48 million Pesseta, Carlo’s mood was quite good.

But after hearing that the fiscal deficit in 1870 alone was as high as 60 million Pesseta, Carlo’s mood wasn’t quite so pleasant.

million Pesseta! Converted to Pounds, that’s nearly 2.3 million, which is definitely a huge sum.

“Where did all these 60 million Pesseta go?” Carlo quickly inquired.

No joke, the Royal Family’s total assets have not exceeded 60 million Pesseta so far. Even the total savings of the Royal United Bank barely reach this figure right now.

The Spanish Government’s annual fiscal deficit alone is as high as 60 million Pesseta; doesn’t this imply that the government’s loss in just one year is equivalent to the total assets of the Royal Family?

Prim expected Carlo’s inquiry. Hearing it now, he remained unflustered and explained with a smile: “Your Majesty, our major expenditures currently fall into three categories: military spending, which accounts for 25.1% of the total fiscal expenditure, with approximately 1.036 billion Pesseta spent annually on military expenditures.

The remaining two are railway construction and industrial construction.

In the entire year of 1870, we built over 500 kilometers of railways and 4000 kilometers of roads. The costs of constructing these railway and road projects are also major expenditures.

The expenditure for the transportation department is also as high as 23%, with expenses in transportation construction reaching 950 million Pesseta.

Although industrial construction is not as extravagant, our spending on purchasing production materials from abroad, building industrial bases, and encouraging private enterprises also amounted to 700 million Pesseta.

Adding in expenses on education, healthcare, and other areas, as well as salaries of government personnel, 412.8 million Pesseta is already the result of multiple rounds of governmental frugality.”

It’s virtually impossible for Spain to achieve reform and industrial expansion without injecting large sums of funds.

Spain’s technology in the industrial sector is already lagging, necessitating the purchase of large quantities of industrial equipment and related technological materials from abroad.

At the same time, building factories, laying out production lines, and hiring workers all require costs, which is also the reason why Spain’s governmental fiscal expenditure remains high.

However, all these investments will have returns, at least in Prim’s eyes. These expenditures are expected to yield results within three years, contributing to Spain’s economic development.

Just the various factories and enterprises continuously springing up during this period in Spain predestine that Spain’s economy will enter a phase of stable growth in the future.

This is also the reason why Prim is willing to allow such substantial governmental expenditure, because with investment come returns, and the funds spent will continue to benefit the government in various ways, enabling it to earn more in the future.

Hearing the reply from Prime Minister Prim, Carlo nodded, somewhat relieved.

Although Spain lacks a large-scale Navy, military spending is still considerable. Especially in 1870, after the wars for Cuba’s independence and the Carlos Faction rebellion, a significant amount of military expenses were incurred.

Moreover, the Spanish Government needs to maintain an army of over one hundred thousand, so the military spending is not much and is actually within a reasonable range.

Fortunately, the reparations from Morocco have helped Spain essentially wipe out the fiscal deficit in 1870.

Additionally, with loans from the Italian Government, and the overall financial income for the entire year of 1871, the Spanish Government is still well-positioned to tackle new constructions and expenditures.

Ultimately, it’s because of the independence activists in Cuba and the Philippines that Spain is compelled to maintain a force exceeding one hundred thousand troops.

After all, not only do these two regions have a penchant for seeking independence, but they are also separated by a considerable distance from mainland Spain. Every crackdown requires a substantial cost from the government, and regardless of the eventual outcome of the war, it’s a loss for the Spanish Government.

Carlo nodded, continuing to pose his question: “Is there enough available fiscal budget for next year? If the finances next year still face substantial losses, there might be no one available to help us fill in the gaps.”

Regarding this issue, Prime Minister Prim had long given it thought: “Currently, the government’s available fiscal budget is close to 1.5 billion Pesseta, and combined with next year’s financial income, continuing our construction projects should not be a problem.

There is hope that 1871 will be a year of peace. If there is no warfare, our military budget should be reducible to around 750 million Pesseta.

The reduced military spending could be used for railway and road construction or industrial expansion, or for promoting literacy education, which would basically be sufficient to meet the government’s fiscal demands for the new year.”

Even though Spain’s fiscal income reached 352.48 million Pesseta, many of the government’s expenditures are fixed and virtually cannot be reduced.

This is also why Prime Minister Prim has to meticulously calculate expenditures, even when they amount to just a few million Pesseta. If a single project spends a few million Pesseta extra, and when multiplied by dozens of such construction projects, the funds wasted would be sufficient to bring down the Spanish Government.

“Prime Minister Prim, since our fiscal budget is adequate, then for the new year, the government’s focus should continue to be on building heavy industry, as well as more extensive literacy education and infrastructure including railways and roads, do you agree?” For the usage of the next year’s fiscal budget, Carlo intended to voice his opinion.

The fiscal income of 352.48 million Pesseta seems ample, but when converted to USD, it’s only around 65.21 million, and when converted to Pounds, it’s only 13.531 million.

If this funding is concentrated on a few key projects, it might yield some results. But if comprehensive construction with simultaneous multiple developments is desired, it seems a bit too idealistic.

Carlo’s goal is quite simple: as much as possible, influence the government to focus on constructing heavy industry, with secondary objectives on literacy education and infrastructure development, while anything else can be postponed.

Fields like healthcare and agriculture currently have very limited development potential. Spain’s land situation determines that the agricultural potential is limited; achieving self-sufficiency is already problematic, let alone large-scale agricultural exports.

Healthcare is entirely limited by current technological conditions. If money is invested in healthcare, it might not even break even in ten years.

For the financially strapped Spanish Government, these two areas can be temporarily set aside, and focus should be placed on the more profitable heavy industry.

Carlo certainly has the authority to propose suggestions regarding government work. Prime Minister Prim also has no opposition to Carlo’s suggestions; he merely hopes Carlo does not overly interfere with the government’s work, imposing his ideas onto the government for implementation.

“Your thoughts align with mine, Your Majesty.” Prim nodded, evidently approving of Carlo’s idea: “For current Spain, the development of agriculture and healthcare can be temporarily deferred.

The government’s current focus will be on the construction of heavy industry and railways, and the promotion of literacy education will also be vigorously advanced.

Until Spain’s finances have an adequate budget, other constructions can be deferred; currently, only heavy industry, education, and infrastructure construction are of utmost importance to us.”