The rating agency Standard & Poor’s has introduced a credit risk assessment perspective that highlights the Valencian Community as stable or possibly positive. As one of the leading names in the sector, S&P suggests that the decision could be announced in the 2024 budget, the first budget of the new regional government. The regional leader, Carlos Mazón, is portrayed as adopting a more cautious and pragmatic approach to both spending measures and revenue projections.
The shift in outlook sends a clear signal to financial markets and creates a window for the Valencian Community to improve its rating over the next two years. Beyond the budgetary plan, S&P notes that the new national scenario could help the Valencian Community by enabling partial debt repayment within the framework of existing agreements with the central government. Spain’s government is negotiating with its investment partners to alter the revenue framework that finances the region.
We revised the outlook from stable to positive, according to a statement from the Generalitat, adding that the positive trajectory hinges on improved budget execution and a reduction in debt over the two-year horizon. The report attributes the rating change to two main factors: the impact of investment agreements and the preparation of budgets by the newly elected regional administration that is widely seen as more realistic.
The S&P analysis notes that the new regional government has adopted a cautious stance for 2024 and explains that the prior approach involved a marked increase in spending. The alignment of spending with national levels in key public services led to substantial budget deficits. The agency acknowledges that the new administration has halted this pattern and is pursuing what it views as a more realistic budgeting approach.
S&P also points out that the latest budget includes several items reflecting central government requests that may or may not be realized, including allocations for health care and tourism growth. The report argues that with more prudent financial management and higher revenue generation from the Valencian financial system, operating deficits could improve.
According to the assessment, investment agreements have a meaningful impact on debt relief and financing reform within the Valencian Community. If the central government agrees to address underfunding, the region could see additional resources through recurring transfers. This expectation is tied to wider agreements between political parties and has been echoed in public statements from government leaders.
Nevertheless, the S&P report cautions that without steady central government support to close Valencia’s funding gap, the region will struggle to balance its budget. The analysis also suggests that the Valencian Community could benefit from the central government’s debt absorption and related financial arrangements, depending on how the national framework evolves.
Moody’s warns that Sánchez’s deals with ERC and Junts raise Spain’s credit risk
The analysis notes that the deals between the Socialist Party and regionalist groups such as ERC and Junts influence the sovereign risk profile. While credible adjustments to Catalonia’s debt reduction from the crisis era are cited, the calculations indicate that any broad application could affect all autonomous communities, including the Valencian Community. An in-depth review shows that relief could approach several billions, though figures vary across analyses. The Moody’s and S&P assessments converge on a shared concern about the path of debt levels and the potential for fiscal improvements depending on how structural deficits are addressed.
The distinction between improving ratings and recognizing the political risk remains clear. Moody’s highlights that the agreements with ERC or Junts could elevate political risk, even as the central government pursues measures to stabilize public finances. The overarching message is that the strength of Spain’s credit profile will hinge on the balance between fiscal discipline, investment, and the capacity to secure durable funding arrangements across regions.