Finance Minister Ruth Merino entered the Fiscal and Fiscal Policy Council yesterday, a forum where leaders of public savings banks discuss critical fiscal topics with the Government. Arcadi España, who attended last year as Minister of Botany and yesterday as Minister of State for Regional Policy, took part in the meeting again.
The Valencian Community is set to receive 15,254,000,000 euros from the regional financing system in the coming financial year. This marks a 13.4 percent increase from the prior year, yet the Generalitat’s budgets will reflect 263 million euros less than what the Executive Carlos Mazón had anticipated. The figures were outlined despite the temporary nature of the current Executive after the elections on 23-J. The central government transferred this amount to all regional administrations during yesterday’s Fiscal and Fiscal Policy Council in Madrid, where spending rules were reinstated after a three year pause caused by the pandemic and the war.
As planned, the Government set a regional deficit target of 0.1 percent of GDP, signaling that fiscal discipline would outpace the European Union in this area. The Valencian Community and all autonomies governed by the PP opposed the target, arguing that the distribution of deviations favored the State, which had reserved 2.9 percent of the deficit (the EU had set a 3 percent ceiling). The current cap stands at 0.3 percent.
This newer limit could force reductions for the Generalitat, which had not aligned its budget with the EU mandated plan for 2024 and shows a deficit of 0.3 percent in effect for 2023 rather than the 0.1 percent target. It was a deliberate choice, not an error, because the Consell was aware of the stabilization plan sent to the EU and chose to challenge the Executive by widening the allowable deficit between revenue and expenditure. A cushion of around 290 million euros in spending now sits in balance.
The initiative will advance in today’s Cabinet session, though all PP-led regions opposed it while Asturias and Castilla-La Mancha, governed by left-leaning administrations, supported the move toward stability.
However, the PP missed a chance to stall the confirmation in the Senate. Minister María Jesús Montero suggested that delaying could backfire, as the original plan aiming for a budget balance would prevail if the debate shifted. The autonomies were granted a tenth of flexibility yesterday. For the Generalitat, this would translate into an additional adjustment of about 144 million euros, bringing the total to just over 430 million.
According to the Ministry of Finance, the Generalitat, frustrated by the ministry’s lack of reform discussion for the financing system, will receive 12,555,000,000 euros for account payments next year and 2,699,000,000 euros as final settlement for the 2022 fiscal year. The Ministry of Finance asked for clarification on how these figures were calculated, noting a discrepancy with Airef estimates in the Valencian Community’s case.
Consell faced the challenge of drafting its budgets without a clear view of forthcoming SFA resources. The calculation relied on a report from the independent tax authority, which projected that the Valencian Community would receive 15,517,000,000 euros in total (12,798,000,000 for account payments and 2,719,000,000 for settlement). With the latest figures, an additional gap of 263,000,000 euros emerges in the Generalitat’s revenue line. The deficit and the SFA resource gap now differ by nearly 550,000,000 euros.
Reform remains distant
Beyond the routine topics, the meeting underscored calls for reform in the financing framework and the cancellation of the debt agreed with Catalonia. Montero noted that regional positions on reform were inconsistent and urged both the PSOE and the PP to negotiate with fewer rigid demands, abandoning maximal positions.
The possibility of creating a leveling fund was cooled as changes to the system were left to Congress, where the PSOE-Sumar agreement includes this as a Compromí condition. Merino urged political courage to push the reform forward.
On debt relief, it was suggested that relief could extend to all autonomies, including those not part of the FLA, with calculations based on the impact of the 2008 crisis. According to Fedea, the aid to the Valencian Community would exclude the portion caused by the autonomy’s unique mismanagement, amounting to an extra 18,000 million according to IVIE data. [Source: Ministry of Finance; Fedea; IVIE]