Romain Duval, the Deputy Director of the European Department of the International Monetary Fund (IMF), indicated that Spain is only half as exposed to potential U.S. tariffs as the average European country.

Serving as the chief of the IMF's mission to Spain, Duval oversees the country’s agenda on growth, employment, climate, and energy.

This evaluation comes as part of the IMF’s annual Article IV consultations, where Spain received positive assessments concerning its economic performance.

Duval noted that the IMF's Executive Board approved the report through the Lapse of Time procedure without formal debate, suggesting that Spain does not currently evoke significant concerns from the Fund.

This approach is rare for major economies but has been executed for other G20 nations, reflecting Spain’s strong short-term economic performance.

Recent data indicates that Spain's economic growth significantly surpasses the average of advanced economies.

Unemployment rates have dropped sharply, household and corporate finances are improving, and banking sector health appears stable.

The country is experiencing a considerable current account surplus, marking a notable contrast to its financial struggles during the eurozone crisis a decade prior.

When discussing U.S. tariffs, Duval mentioned that a hypothetical 10% tariff on EU goods from the United States would decrease Spain’s GDP by approximately 0.1%.

Although Spain is exposed to tariffs, its overall risk remains considerably lower than that of other European economies, including Germany.

Spain's trade exposure to the U.S. is limited, particularly concerning industries such as automotive parts, where components are often sent to Germany before reaching American markets.

Duval emphasized the inherent uncertainties regarding tariffs, including potential nonlinear impacts that could lead to disproportionate effects on the Spanish economy, particularly relating to supply chain disruptions and changes in pricing.

In response to potential economic challenges, Duval acknowledged the Spanish government's initiatives to support companies adversely affected by unforeseen trade disruptions, suggesting that assistance might be necessary for firms seeking to adapt their export markets.

Concerning fiscal policies, Duval called for accelerated fiscal consolidation, estimating that the Spanish government needs to implement additional measures equivalent to 1% of GDP to effectively achieve its own five-year deficit reduction target of 2%.

With rising social security contributions and changes in tax regulations, it is projected that the fiscal deficit would only decrease by one percentage point without these additional measures.

Duval stressed the need for a balanced approach to fiscal policy that addresses both short-term economic stabilization and long-term sustainability of public debt.

Given existing pressures from rising healthcare and pension costs—projected to increase by between 4% to 5% of GDP by 2050—he highlighted the importance of timely fiscal consolidation efforts.

The discussion also touched on potential tax reforms, with Duval proposing an adjustment to Spain’s Value Added Tax (VAT) and the elimination of the banking tax.

He noted the potential for increased VAT to generate additional revenue while cautioning that any new measures should include provisions to protect vulnerable populations from undue financial strain.

With respect to Spain's political landscape, Duval acknowledged the complexities posed by political fragmentation, especially in adverse economic scenarios.

However, he pointed out that provisions such as the automatic extension of budget allocations mitigate some of the immediate risks associated with political gridlock.

He expressed a concern that internal political challenges could hinder the government’s ability to execute faster fiscal consolidations necessary during an economic downturn.

On matters of defense spending, Duval assessed that the current fiscal impact of increased military expenditure would be minimal, projecting only a 0.2% increase in the deficit for the coming year.

However, he recognized that sustained increases in defense spending could pose more significant fiscal challenges in the future.

In terms of region-specific fiscal policies, Duval emphasized the importance of aligning spending paths of autonomous communities based on their individual financial situations.

He indicated that any adjustments should be implemented alongside robust fiscal discipline to ensure sustainable economies across all regions.

The topic of Catalonia's specific financial treatment remains contentious, and Duval reiterated that any measures should also adhere to stricter national fiscal regulations.

Regarding the potential BBVA-Sabadell merger, Duval highlighted the need to consider both competitive dynamics and financial stability, asserting that any merger should balance efficiency gains against potential reductions in market competition.

The European Central Bank's approval, according to Duval, may sufficiently address concerns about financial stability stemming from the merger.

Lastly, Duval noted the importance of improving productivity levels in Spain, pointing out that the country’s leading publicly listed companies invest significantly less in research and development compared to their European counterparts.

He argued that addressing barriers to trade among regions could facilitate the growth of dynamic new businesses, fostering a more robust economic environment.