The rise in interest rates will take a big bite out of the public accounts of autonomous communities. on average, interest expense Public debt According to calculations made by the Autonomous Administration, the number of autonomies will double between 2023 and 2026. Applied Economic Studies Foundation. Fedea estimates payments will increase from 4,174 million in 2023 to 8,659 million in 2026. If the difference in expected interest payments for the period between 2022 and 2026 is taken as a starting point, Fedea calculates that communities will pay an additional 5.051 million in interest. an amount on the public debt that must be deducted from other policies to balance accounts.
The authors of the report are based on “optimistic” assumptions that all autonomous communities meet the budgetary targets set by the Government. open Equivalent to 0.3% of GDP in 2023; budget balance in 2024 and excess It will be used to reduce public debt levels in 2025 and 2026.
Under these assumptions and the increase in interest rates and half-life of securitiesAmong other assumptions, Fedea concludes: Catalonia, Interest payments will increase 2.3 times between 2022 (1,029 million) and 2026 (2,412 million). debt volume it will barely increase by 1.75% to 85,806 million.
In general, Fedea average debt ratio regional public debt (measured as the ratio between the outstanding public debt stock at year-end and the annual interest payment) will increase from 1.1% in 2022 to 2.7% in 2026. A 1.2% jump for Catalonia rose to 2.8% over the same period.
Differences between autonomy
The effect of an increase in interest rates on bank accounts each of the communities Depends on the volume of debt with which it begins and, in each case, the measured life of the title deeds. The initial interest rate also has a significant impact. In communities that are less dependent on Government financing funds (such as the Autonomous Liquidity Fund, FLA) such as Madrid, Basque Country or Navarra, the increase in interest expenses will be less for two reasons: they start from a higher type. their titles have a longer term (on average 8 years).
So interest expense Madrid, Navarra or Basque Country According to the calculations of Fedea, it will increase approximately 1.5 times in 2026.
Conversely, the interest on the invoice Valencian CommunityAccording to Fedea’s calculations, e could increase 3.7 times from 361 million in 2022 to 1.346 million in 2026. someone Castile la Mancha will increase 3.6 times (up to 372 million); This Canary Islands And Murcia3.3 times (up to 162 and 313 million, respectively), and Galiciawill triple (to 306 million in 2026).
Calculations leading to the payment of interest will be multiplied by 2.9 in the Balearic Islands (up to 216 million in 2026); 2.7 times (144 million) in Extremadura; 2.6 times Andalusia (1,013 million); 2.5 times (92 million) in Cantabria and 2.3 times both Aragon (261 million), as Asturias (125 million) or Catalonia (2,412 million). For Castile and Leon The interest payment on the debt is expected to increase by 2.2 times between 2022 and 2026 to 397 million.
Announcement to autonomous governments
“In the coming months and years, Spanish fiscal policy should not overlook the financial impact of past and present debt on public accounts over the medium term,” the authors of the report, published by Fedea, wrote. Therefore, “all autonomous communities they should very cautiously adjust their expansionary fiscal policies, which they can develop now and in the coming years, especially given that the new fiscal rules may be implemented in the eurozone in 2024. It ends with the famous quote from Game of Thrones, while warning that “autonomous communities attempting significant tax cuts and/or spending on projects of dubious social profitability will clearly harm the sustainability of regional public accounts.” is coming’ (winter is coming).