This Monday’s meeting of the Fiscal and Fiscal Policy Council (CPFF) turned into a battleground between economic advisors of the autonomous communities And Treasury Department. On the one hand, due to the regional funding model and the absence of a Catalan advisor who claimed to be in bilateral negotiations with the government; on the other hand, debt forgiveness was agreed upon with the same community, but how it will be implemented has not yet been clarified. Communities governed by the People’s Party have presented a common front even with some socialists and stressed that they will not agree to negotiate with Catalonia in other ways.

But Finance Minister Maria Jesús Montero knew the meeting would be difficult, and so a few tricks up your sleeve: increase in regional funding by 15%, to 154.467 million euros; a more flexible deficit target of 0.1% instead of the planned budget balance, as well as promises that bilateral negotiations with Catalonia are not taking place, at least for now, and that regional debt write-off will affect all autonomies. All with an eye to approving the state’s general budgets for 2024, because the last purpose of this Monday’s meeting was to convince councilors, especially the popular ones, that the PP should approve the bills proposed by the government, because the opposite would be worse for them.

“We have confirmed the government’s commitment that the Central Administration will assume part of the debt all autonomous communities of general regime are in debt to the Autonomous Liquidity Fund
(FLA) or have debts to financial institutions when entering the markets. I suggested that they read what was signed, because the document that was signed with the ERC, the document itself, says that this debt assumption model will apply to all general regime autonomous communities. What we have to listen to is how some people invent that this is dissatisfaction with the remaining territories, because what is done with Catalonia is not done with the rest… it is gratuitous and is done with the aim of noise and confrontation,” Montero reproached the councilors that in the morning they did not spare their criticism.

Montero doubles down on PP threat

Therefore, the government proposes very clear agreement: Forgive a portion of the regional debt for each of the regions so that they can enter and finance themselves in financial markets, and expand the reach of regions and local entities in exchange for moving their budgets forward. . And the first step towards this is the stability goals, since the distribution of the deficit between subsectors is known, which the government has put on the table today. Argument? In this way, the government will be able to ensure that the CCAA has “fiscal autonomy” and therefore funds itself based on its own criteria, as some already do.

The minister assures that the regions will have to redo their budgets

The PP threatened to block budgets in the Senate, where it has an absolute majority, and in this regard Montero clarified that if such a blockage occurs, the regions They won’t be able to count on the difference the Treasury has just offered., since they will then have to comply with the Stability Plan, which was sent to Brussels in April and which includes more stringent targets and therefore represents a more serious requirement. Thus, if the NP does not accept the stability goals proposed by the Treasury, its regions will have to rework their own budgets. In the same sense, he recalled that the chambers approve the goals of stability, since the approval of an expenditure ceiling is something that corresponds only to the government of the country.

Autonomous financing in markets, in focus

Returning to the assumption: “I prefer to say ‘assumption’, although it is usually called forgiveness,” Montero said, “it aims to forgive regions the debt they created during the financial crisis, and this measure is wrapped in a very specific story.” . The People’s Party, then in government and with Christopher Montoro at the head of the treasury, did not provide sufficient resources to the autonomous communities that forced these take on “extraordinary debt” it is marked “before and after”. And this is what the government has now agreed on compensation with Catalonia, but not only with Catalonia.

“What is a moral hazard is that the autonomous communities must continue to finance themselves through the regional liquidity fund (FLA), which is something exceptional. [La asunción de la deuda] “This will allow autonomous communities to fully or partially access markets to finance themselves.” that the regions are financed normally in the markets and do not depend on emergency mechanisms. Trying to improve the financing of the autonomies, and also to avoid what happened during the years of economic crisis, when their freedom of action was reduced due to the restrictions imposed on them.

In this way, the government is committed to ensuring that communities have “fiscal autonomy” and can be funded based on their own criteria. However, debt forgiveness – which is unclear how it will affect the territories, only that the Treasury will try to take the population of each autonomous community as a standard, since the assumption of debt interest will lead to unequal treatment – is no sign either, it is the easy way out. The Minister of Economy of Madrid, Rocío Albert, this Monday recalled the position of her government: “Those who [deuda] They have to pay.”

The Treasury will try to convince them that this is the minimum they should accept, given the great efforts that the Central Administration plans to make, which will take over the deficit, which it now makes more flexible for regions and local entities, and this will allow them to have greater financial margin. Exactly next year European tax rules, suspended in recent years due to costs incurred by the pandemic and rising prices due to Russia’s invasion of Ukraine. For local organizations, the path has also become more flexible, and the goal will now be to achieve budget balance instead of the 0.2% surplus that was planned for 2024, 2025 and 2026. The administration will increase from 3% to 2.7% by 2024.