Foundation for Applied Economics Research, FEDEA, published a study that examines how regional governments in recent years view public spending and the sustainability of debt. The research, led by Carmen Marín and Diego Martínez, explores the preferences of Spain’s autonomous communities (CCAA) when shaping fiscal policy. The aim is to understand how these governments balance spending, macroeconomic stability, and debt sustainability in practice.
The findings reveal notable differences among regions. Valencia stands out as the region with the lowest financial health due to a higher debt share. Traditional fiscal models usually emphasize two goals: stabilizing the economy through countercyclical policy and ensuring debt sustainability. The study adds a third objective often present in regional policy debates: maintaining a minimum level of per capita public expenditure, which frames the report in a contemporary context.
Researchers extend the conventional framework by incorporating this third objective. The model is calibrated using data from 2013 to 2022 to capture the declared preferences of each regional government regarding the relative importance of the three objectives described above. This approach helps reveal how much weight each region assigns to per capita spending, macroeconomic stability, and debt sustainability in its budget choices.
With the exception of 2020, the analysis shows that the Autonomous Communities generally place the strongest emphasis on delivering a specified level of public services through per capita spending, typically in the 40 to 60 percent range. The priority given to macroeconomic stability tends to be slightly below that level, while debt sustainability generally receives the least emphasis. In some specifications and in years just before the pandemic, its weight drops toward zero.
In the first group of autonomous governments, comprising the Balearic Islands, Castilla-La Mancha, Murcia, Catalonia, and the Valencian Community, the public expenditure target carried a weight around seventy percent. Debt sustainability usually stayed under ten percent. The authors observe that high debt levels and reliance on extraordinary financing mechanisms help maintain favorable conditions, which in turn dampens the sensitivity of fiscal policy to regional debt levels.
A second group of autonomies, including Andalusia, Aragon, Asturias, Cantabria, Castilla y León, Galicia, Extremadura, and La Rioja, shows a profile very similar to the overall pattern described for the sector. During the period under review, some regions experienced changes in government or stayed on a comparable fiscal path despite different ideological leadership. This suggests that ideology plays a smaller role in shaping regional fiscal policy than commonly thought.
debt worry
A third group—Canary Islands, Basque Country, Navarra, and Madrid—shows a distinct focus. For these regions, debt sustainability values sit around thirty to forty percent. The first three regions enjoy relatively stronger financing, which influences their starting levels of per capita public expenditure. In contrast, Madrid does not enjoy above-average financing but places an even higher emphasis on debt sustainability than on public spending.