A group of autonomous administrations led by the PSOE, including the Canary Islands, Castilla-La Mancha, and the Balearic Islands, submitted a formal letter to the Ministry of Finance during the Finance and Fiscal Policy Council meeting held this Wednesday. The proposal calls for a funding mechanism for regions similar to the Covid Fund created in 2020 and 2021, aimed at mitigating the economic strain caused by inflation. It seeks temporary resources from the State to ease the current macroeconomic pressures. The request echoes the approach already presented to the CPFF by Valencia’s Minister of Finance, David Spain, and is framed as a prudent measure to shore up regional finances in a still fragile national economy. [Source: Ministry of Finance]
These sentiments were echoed by several socialist regional councilors as they spoke to the media after entering the Fiscal and Fiscal Policy Council session this Wednesday. Their comments touched on topics such as the spending ceiling and the loosening of deficits, while maintaining the broader aim of reinforcing regional budgets in the face of inflation. [Source: Regional governments]
In this debate, Canary Islands Finance Minister Román Rodríguez was among the first to raise the possibility of establishing a fund that could be named either “covid” or “anti-inflation” to counteract the financial pressure produced by the present crisis. The idea centers on creating a stabilization tool that can provide quick relief to communities affected by rising prices. [Source: Canary Islands government]
Equally, Balearic Islands Treasury Secretary Rosario Sánchez indicated openness to watching the central government’s revenue projections and, as he noted, would suggest measures to determine how the State’s performance translates into support for regional expenses arising from price shocks. [Source: Balearic Islands Treasury]
regional financing
Likewise, several socialist-led regions reiterated the need to reform the autonomous financing model, though this topic was not on the formal agenda of the Fiscal and Fiscal Policy Council meeting. [Source: regional statements]
Castilla-La Mancha Treasury Minister Juan Alfonso Ruiz Molina argued that it would be sensible for the Treasury to initiate a Covid-like compensatory mechanism even as broader reforms to the regional financing system are pursued. The fund would act as a temporary buffer, ensuring capital is available to support services during inflationary waves. [Source: Castilla-La Mancha]
The idea received support from Arcadi Spain, who attended the session for the first time and underscored the imperative to complete the financing reform and pressed the ministry to respond promptly to the regions’ needs. [Source: Arcadi Spain]
Spain highlighted Valencia’s main claims on Tuesday, calling for a comprehensive reform of the financing model, the establishment of an asymmetrical framework among communities, and a review of the historic debts of the regions. [Source: Valencia government]
Reference rate
On the matter of easing the deficit target for autonomous communities to 0.3 percent, the Canarian legislator warned that this would be inadequate, arguing that the deficit quota would be lower than the State’s, and urged an internal discussion within the Fiscal Policy Council. [Source: Canary Islands]
Castilla-La Mancha’s councilor echoed the concern that the 0.3 percent target is insufficient, while noting that the central government’s reference rate would stand at 3.2 percent. [Source: Castilla-La Mancha]
In contrast, Extremadura Finance Minister Pilar Blanco welcomed the 0.3 percent easing as a sensible step to navigate the new macroeconomic landscape and to safeguard public services for citizens. [Source: Extremadura]