The Generalitat’s debt relief plan and its wider implications
The possibility of wiping out 10 billion euros of the Generalitat’s debt in a single move emerged as part of a bilateral agreement reached yesterday between PSOE and ERC. The deal includes a promise to forgive 20 percent of Catalonia’s debt to the state, equating to roughly 15,000 million euros in this specific case. Although the agreement was negotiated directly between the two parties, Minister of the Presidency Félix Bolaños confirmed that the financial aid mechanism used for Catalonia could be extended to all autonomous communities.
Looking at the Valencian Community, it holds the second-largest absolute liabilities among the autonomous communities, with 57,000 million euros recorded as of the latest update in September. It also stands out for its wealth, representing about 43% of regional GDP. Of this, 48,344 million corresponds to the Autonomous Liquidity Fund (FLA), the instrument that allowed the State to assume regional liabilities in 2012 and to finance itself after the financial crisis of 2008.
The amnesty announced by Bolaños is framed as relief for autonomous communities facing financing pressures. It focuses on liabilities to the State, which constitutes the majority of the Consell’s outstanding obligations. In Valencia, applying a 20 percent relief to just over 48,000 million would translate to an immediate forgone amount of 9,668 million from Valencia’s budget, providing substantial relief to the debt load.
Ruth Merino, in her briefing, described how this situation became a real headache for the regional financial manager who drafted the accounts. Responsibility requires allocations that squeeze almost 8,000 million—more than a quarter of the next year’s budget—due to the combination of deadline expirations and rising interest costs, compared with 2023 figures. The consequence is a tighter fiscal path for the coming year.
“Fair” terms and cautious optimism
Source lines from the Consell shortly after the announcement indicated that the exact terms of the deal still needed to be clarified to assess its full impact. Regardless, they accepted Bolaños’s assertion that the agreed measures would apply to all common-regime autonomies, including Valencia. A representative from the Finance Ministry argued that if the framework is truly universal, Consell would expect equal treatment given Valencia’s longstanding underfunding.
Just hours before the ERC-government accord was signed, Valencia’s president Carlos Mazón cautioned that erasing debt across autonomous communities was not the most critical issue, and he urged consideration of a new regional financing model. Still, he warned that Valencia would stand to gain first if the amnesty is implemented, given its precarious financial situation.
As Mazón put it, any charitable action should begin with Valencia. The discussion, he added, could be seen as compensation for delays in launching the new financing framework for regions. The underlying message is clear: if the Government forgives debts for underfunded communities, Valencia would expect to be included and respected within the new system.
Àgueda Micó, deputy spokesperson for Sumar and a Compromís representative in Congress, commented on the agreement by saying it opens a new path to defend Valencian interests. Micó emphasized that debt forgiveness would only be supported for Catalonia if Valencians are included as well, calling the idea fair and necessary for equity among communities with diverse funding histories.
Overall, the discussion centers on balancing immediate fiscal relief with long-term reform. The debt forgiveness approach aims to ease current pressures, while advocates push for a sustainable regional financing model that distributes funds more equitably and prevents recurrent deficits across autonomous communities. Observers note that the real test will be how the consolidated framework treats Valencia and other regions that have faced chronic underfunding, and whether the promised universality of the relief measure will translate into practical, nationwide relief.
In this atmosphere, policymakers, regional executives, and national authorities are navigating a delicate intersection of financial necessity and political accountability. The aim remains to stabilize regional budgets without compromising essential public services, and to lay groundwork for a financing system that meets the needs of all autonomous communities in the years ahead. The conversation continues as stakeholders await the concrete terms and the final scope of the amnesty’s application across the country, including its impact on the Valencian administration and its taxpayers.
As discussions progress, analysts suggest that any broad mechanism will need careful calibration to avoid creating incentives for fiscal imprudence or unanticipated fiscal gaps. The focus remains on ensuring that debt relief is paired with reforms that enhance long-term fiscal resilience and predictable funding, benefiting citizens across the Valencian Community and beyond. The outcome will hinge on transparent implementation, fair treatment across regions, and a clear path toward a stable and sustainable regional financing framework.