The Foundation for Applied Economic Research (Fedea) warns that the “unconditional forgiveness of regional debt” included in the investment agreement between Pedro Sánchez’s PSOE and the ERC is a terrible idea because it will further aggravate the serious incentive problems already exposed to the financing system of common regime autonomies”.
In an analysis published this Wednesday on the economic content of investment agreements, Fedea’s managing director said: Fountain Angel, “Given previous experience, any reductions that are not subject to strict regulatory conditions will tend to confirm the perception that autonomous communities already have. Able to systematically spend more than he earns because in the end the State will bail them out in one way or another at no cost, and therefore constitutes an invitation to fiscal indiscipline.” From De la Fuente’s perspective, “in order to encourage fiscal irresponsibility, the agreement is insurmountable.”
De la Fuente: “The agreement is insurmountable in terms of encouraging fiscal irresponsibility”
Governor of the Bank of Spain, Pablo Hernandez de Cos, He also warned about the contraindications of regional debt forgiveness. At a public event this Monday, he warned that the reduction of regional debt agreed by the PSOE and the ERC is a patch that once again highlights the “old problem” of the Spanish regional financing system. “We have a financing system that we never consider to be completely closed, after all the financial imbalances of the autonomous communities, budget deficits and public debts are not an indicator of good or bad management of the regions, but quite the opposite. indicator of lack of resources“, caught.
The Governor is concerned that the lack of resources will be used as an excuse to bail out the State, as was the case many years ago with the autonomous financing fund (FLA) of the Government of Mariano Rajoy (PP) or the current cut by the Government. Sánchez is determined to promote his manager.
Estimated 88 billion
The investment agreement between PSOE and ERC included a commitment to forgive Catalonia’s 15 billion euros of debt contracted with the State through the Generalitat’s Autonomous Liquidity Fund (FLA). PSOE also committed to extend the donation to all other common regime autonomies (except the Basque Country and Navarra).
The $15,000 million to be forgiven to Catalonia corresponds to 20% of the debt contracted with the FLA. Fedea calculates that this 15,000 million is equivalent to: Adjusted 1,980 euros per person (with 2021 data) and extending this relationship to the rest of the regime communities “total almost 88,000 million euros, “Of these, 16,400 will correspond to Andalusia, 12,900 to Madrid and 9,750 to the Valencian Community.”
However, the Government has not yet specified what precise criteria will be applied in generalizing regional debt forgiveness. The agreement with the ERC merely compensates for the larger debt incurred by communities during the financial crisisIt refers to the period between 2007 and 2014.
In this sense, the reduction of 15,000 million from Catalonia corresponds to 31 percent of the additional debt that Catalonia accumulated in the previous financial crisis. If the State had assumed almost a third of the debt accumulated by all autonomies during this period, the total reduction approximately 55,000 million. But this, like everything above, is merely a calculation hypothesis; math formula Treasury will apply.
Investment agreements
In the article published by Fedea, Ángel de la Fuente analyzes the economic impact of the investment and legislative agreements reached with PSOE Sumar, ERC, Junts, PNV, BNG and Canary Coalition.
The author points out that the agreements leave many important issues open, sometimes limiting themselves to initiating a negotiation process on which the continuity of the legislature of nationalist parties depends.
However, at the beginning, the author makes sure that the analyzed texts are at least two risks and one certainty. precision “The general and unconditional forgiveness of some of the debts of common regime communities will contribute to the further aggravation of the financial indiscipline problems they are currently experiencing,” he states. risks These are economic growth, employment and sustainability of public accounts“Social and territorial harmony on the one hand, and on the other,” he adds.