The negotiation between the PSOE and the ERC for the appointment of Pedro Sánchez served to obtain from the incumbent Government a commitment to partially forgive Catalonia’s debt to the State, which could be extended to the rest of the country. autonomous communities of common regime (not for the Basque Country and Navarra), as explained by Félix Bolaños, Acting Minister of the Presidency. It is known that the state will forgive $15,000 million to Catalonia, but it has not yet been announced that the debts of all communities will be completely erased.
What criteria will be used to determine regional debt forgiveness?
The agreement signed between PSOE and ERC, explosive growth of regional debtIt broke out after the economic and financial crisis that has been experienced since 2007. The text reminds us that all autonomies had debts from 2007 to the end of 2014. multiplied by four. “Some of the debt growth in these years has been impact of crisis in regional public finance and economic cycle and the inadequate response of Europe and the States to the crisis is very different from the response since 2020 to the effects of the pandemic and the subsequent energy crisis caused by the invasion of Ukraine.” Forgiveness of regional debt would mean forgiving the part of it “resulting from the negative impact of the economic cycle” In the case of Catalonia this impact has already been estimated (15,000 million).For the remaining autonomies figures unknown It may be possible to remove it.
Will all communities’ debts be forgiven at the same rate?
Not at the beginning. In the case of Catalonia, the $15,000 million to be forgiven is equivalent to 20% of Catalonia’s debt to the state through mechanisms such as the Autonomous Liquidity Fund (FLA). Socialist sources predict that the percentage of forgiveness will not necessarily be the same for all communities. To calculate this, it is stated in the agreement text that “it will be determined how much of the increase in debt is due to the effect of the cycle.” In any case, theoretically and for reference, estimating this 20 percent over the entire territorial debt to the State (191,750 million) would lead to: a decrease of approximately 38,350 million. Catalonia is the community with the highest debt under the FLA (73,110 million, 84% of total debt). They follow him Valencia (48.344 million, 84.45%), Andalusia (25,409 million, 66.8%), Castile la Mancha (11,363 million, 71.7%) and Murcia (10,285 million, 85% of total debt).
Will Madrid’s debt also be forgiven?
In principle yes. The document of the agreement between PSOE and ERC clearly states that after calculating how much of the regional debt is related to the previous crisis, “the transfers can also be used for debt cancellation in case of debt to different third parties.” If necessary, the State”. This slogan leaves the editorial office door open Forgive my debt to MadridIt does not currently have any debt to the government as it is independently financed in financial markets. Basque Country and Navarra They, too, owe no debt to the State, but are outside the scope of an agreement designed “for all autonomous communities with a common regime.”
What advantages do autonomous communities receive?
First of all, autonomous governments will be saved from returning to the state. amount forgiven (15,000 million in the case of Catalonia). Second, they will avoid paying the government Areas of interest for these titles. Catalonia estimates that the forgiveness of its 15,000 million debt will exempt it from paying 1,300 million in interest to the state in the coming years. According to calculations made by his partner, the average interest rate on regional debt to the state is currently around 0.75% and its average life is 5 years. International Financial Analysts (AFI) Carmen López presented at a conference on ‘Debt and the sustainability of regional finance’ held in Valencia last March.
Who loses with this deal?
The state will lose its accounts as long as the treasury remains stagnant. enter into interest this is linked to debt (1,300 million in the case of Catalonia). The General State Budgets will also suffer losses to the extent that they cease to collect the principal of the debt when it falls due (the resulting amount for Catalonia and all communities of 15,000 million). HE debt level of all administrations Spain – 111.2% of GDP in June – remains unchanged. What changes is the distribution of these percentages among different administrations. The low debt level of the autonomies gives them a better rating from agencies ‘rated’ and independently funded in the marketsWithout being dependent on the Treasury. “In order to improve the financial position of the Generalitat and facilitate its return to the financing of debt markets, a legislative amendment will be made to allow for the assumption by the State of a general scope for all common regime communities.” regional debt
Will the Autonomous Liquidity Fund be protected?
Yes, the text of the agreement between PSOE and ERC clearly states that the reduction of regional debt “shall be understood without prejudice to the ability of the FLA to continue to operate as a last resort in critical market situations.” Thus, the financial rescue mechanism for autonomies launched by the then Minister of Finance in 2012, Christopher Montoro (PP) will survive in case it is needed again in the future. Since 2012, the Treasury’s different financing instruments (including the Supplier Payment Fund) have injected $400,000 million into autonomous communities that still have outstanding debts of 191,750 million.