The announcement of the euro zone’s first rate hike in eleven years fuels Consell’s worst nightmares in the context of international economic uncertainty. The measure, adopted by the European Central Bank (ECB), has raised concerns among the regional executive as he will have to face a backpacking new scenario with a huge debt of 53,000m euros, 80% of which is the product of underfunding. .
How much will Generalitat have to bear due to the 0.25% increase in rates and the change in the Euribor rate? Finance experts consulted by this newspaper calculate that the cost of interest could skyrocket by 93.4% in two years, taking into account current debt: If the expenditure on this concept were calculated as 285.48 million euros in this context, by 2022, by 2024 the figure would be 425.65 may reach 552 million, million of which are due to lack of resources from the regional fund distribution system. To put it in more understandable numbers for ordinary mortals: Consell now pays 782,100 euros per day in interest and will spend 1.5 million euros every day in two years.
These estimates help to understand the entrenched concern in Palau about the effects of the new European interest rate policy on the Valencian public economy. President Ximo Puig’s reaction was seen last Monday when the Consell president settled in Madrid to effect a recurring and now even more necessary demand in the Botànic years: the cancellation of the Valencia debt. The dilemma that arises is whether the Government reciprocates the historical obligation attributable to insufficient financing or adds extraordinary funds that offset the extra cost of interest in the coming years.
Forgiveness has been cited by Puig – in his federalizing rhetoric – as a fundamental condition to “guarantee the Welfare State” and to avoid “unfair competition” resulting from “financial dumping” by other communities such as Madrid.
For practical purposes, Generalitat has managed to significantly lower the cost of debt in recent years, from 3.12% in 2010 to 0.62% at the end of 2021, with a new projection of decline this year through reformulation negotiations. outstanding loan transactions.
Since 2017, Generalitat has refinanced a total of € 6,440 million in loans at higher interest rates at lower interest rates for new long-term operations. The result was accumulated savings of 120.5 million Euros. In fact, liability-related financial expenses fell 15% (52 million less) from last year in 2022: from 338.46 million to 285.48 million.
However, despite all efforts, Consell is now faced with the paradox that the cost of debt will rise and she will need to devote more resources to paying interest on the money owed to her, which should come fairly. regional financing system whose reform has been delayed over time.
32% increase in 2023
After the ECB announcement, according to expert forecasts, the interest item will increase by 93 million euros (32.4%) in 2023 and 174 million euros (46%) in 2024.
Financing received by Consell through different mechanisms of government represents 83.3 of the current living debt of the Community of Valencia, the Spanish region supporting a larger volume of liabilities relative to Gross Domestic Product (GDP). This rate rises to 47.8% with a debt-to-GDP ratio of 36.5%, almost 22 points above the state average and 11 points ahead of Castilla-La Mancha, the next autonomous community in the classification. Only the Catalan Generalitat currently exceeds Valencia in terms of debt, with 53,820 million euros as of December 2021 in absolute terms. The Valencian Community experienced its largest increase in indebtedness between 2010 and 2015, when the relationship between passive and regional GDP was multiplied. two, it increased from 19.9% in 2010 to 42% in 2015.