Madrid is an autonomous community with the lowest public debt volume relative to its GDP. Its debt only accounts for 13.5% of regional GDP, which is three times less than the country’s debt. Valencian Community (44%) or 2.5 times less Catalonia (33.4%). However, the interest burden on Madrid’s public debt (0.29% of GDP) is the same as Valencia’s and not far from Catalonia (0.40% of GDP).
National Accounts data on regional finance for 2022 published on March 30 by General Government Intervention The next day’s update of public debt statistics by (IGAE) and the Bank of Spain allows to put numbers and nuances on the interest burden carried by communities. The financial recovery mechanism established by the PP government at the end of 2012, Autonomous Liquidity Fund (FLA), fulfilled Ten years. The result is that freedom has a pricealso in regional finance.
Freedom has a price…
explaining reason Madrid carry the same interest burden as Valencia Although he has three times less public debt, the community he currently heads Isabel Ayuso In the midst of the 2012 crisis, he chose to continue to go to the financial markets alone to meet his budgetary needs. Madrid renounced State aid, which, through the FLA, offered cheaper financing to all communities than the Treasury, yes, in return, yes, it was subject to enhanced oversight. Treasure and possible interference with their accounts. The Treasury estimated savings of approximately €22,000 million in interest payments for these communities for the first five years of validity of the mechanisms only.
The unstable budgets of most of the communities and all autonomies such as Catalonia, Valencia, Murcia caused them to be tied to the Treasury. For only the first five years of the mechanisms’ validity, the Treasury estimated savings of approximately 22,000 million euros in payments. of interest to these communities.
Madrid, Basque Country and Navarra they could afford to stay on the sidelines from the start. Then the plugs were pulled Galicia, Castilla y León, Canary Islands and Asturiasas described Cesar CantalapedraPartner of AFI Consultores de Administraciones Públicas.
Demonstrating this financial freedom under the more expensive issuance penalty helps explain why Madrid carries as much interest as Valencia relative to their GDP, despite being three times more indebted.
A similar conclusion can be drawn if one analyzes the effort each community makes to pay its interest each year, as a recent study by the agency revealed. Scope Ratings. Data from the IGAE at the end of 2022 concludes that while Madrid is the lowest indebted community, it has the second highest percentage of current income from the box that should be set aside each year. pay interest (2.5%). Only Cataloniamore than double the debt Madrid, allocates a slightly higher percentage (2.8%) of their income to paying interest. Valencia, which has three times the debt of Madrid, allocates 1.8 percent of its current income to interest.
Financial autonomy from the FLA
“This is due to the greater financial autonomy of Madrid, which, along with the formal communities, is the only Spanish region that does not receive funding from Spain. central government liquidity lines. This is offset by higher financing costs, although this is more favorable than regions most dependent on public debt financing, such as Catalonia and the Community of Valencia, which represent more than 80% of the total debt,” explains the Scope Ratings analyst report.
84.5% of Catalonia’s total liabilities are credited to the State through instruments such as the FLA. In the case of Valencia, this rate is 83.5%. Almost 92% of Cantabria’s debt is owned by the State and Murcia (86%). Lowest percentages of FLA addiction after Madrid, Basque Country and Navarra Castile and Leon (16% of your debt), Canary Islands (20%), Asturias (20.3%), and Galicia (24%).
Thus, the following conclusion can be drawn from the data analysis: Madrid, Basque Country and Navarra (Three communities that were never affiliated with the FLA) for example, allocating more of their income to interest payments Extremadura, Galicia or La Rioja, those who have more debt but benefit to some extent from the cheaper financing provided by the Treasury.
Another result: Balearic IslandsIt is the fifth community with the highest debt volume with 26.6% of GDP. 2 times more debt Basque Country anyone Madrid. However, he devotes almost the same percentage of his income as the Basque Country to interest payments on his debt, and half as much as Madrid.
…the last laugh
But the story does not end here. The sentence “freedom has a price” from which this analysis begins can be continued with the phrase “Liberty has a price”.he who laughs last laughs best“.
“There is no other community funded at a better price than the treasury,” explains César Cantalapiedra. “First of all, there is no cheaper way to get financing through the FLA,” he adds. But maybe just a priori. The FLA was launched in 2102 with a near-zero interest rate and a relatively short loan term, 10 years (later extended to 12). The title deeds of that period, which began to mature at the end of 2022, now need to be refinanced to the Treasury at increased interest rates. On the other hand, communities Madrid, Basque Country and Navarra, It is true that these years they financed themselves at a higher price than the Treasury, but they did so with longer-term securities and will now be able to get through the looming crisis more slowly. rising interest rates. Hence the old saying that the last laugh can be brought up.