The Valencian Community cannot push its public debt to the reference levels that the tax authorities would require without state reductions or a very favorable reform of how financing works. This is the central finding of a report published yesterday by Fedea on obligations in Spain and the autonomous communities. Valencia is identified as the relatively most indebted region in the country, scoring low on available resources under the current distribution model.
The study outlines the “financial efforts” each autonomous region must undertake over 5, 10 and 20 years to bring public debt to target ratios relative to GDP, and it concludes these efforts must be substantial for the country as a whole. In the case of the Valencian Community, those efforts appear unlikely to be achieved, according to Diego Martínez, one of the report’s signatories, who notes it is “almost impossible” given its starting point within an economy where the autonomy’s GDP is part of the national total. The region has carried a larger debt burden in the past year, a factor the report attributes largely to underfunding in the current model that ended in 2014.
Official data through the end of 2021 show Generalitat liabilities at 47.8% of GDP, exceeding 53,000 million, with no other autonomous community close to 40% and only four above 30%. Fedea estimates the annual financial results needed by each community to eliminate deficits to reach 13% and more modest levels (19.5% and 26%), which align with the maximum rates set by stability rules for these entities.
Regions starting from a stronger position (Madrid, Navarra, Canary Islands and the Basque Country) could even hit the 13% target with a deficit, making the approach seemingly viable for those areas. For the Generalitat, achieving the same would require unprecedented surpluses, a path that the economic research establishment does not view as feasible. “The most indebted autonomous communities (a group including the Balearic Islands, Murcia, Catalonia, Castilla-La Mancha and the Valencian Community) will need surpluses of a magnitude not seen in their historical records and far from any realistic trajectory,” the report summarizes.
The findings become clearer when delving into the report’s details, which substantiate the claim that Valencia has faced state cuts in parallel with reforms to the financial system. Fedea estimates that the Generalitat would have to close 20 consecutive years with a 0.2% surplus to fit into the most conservative scenario with 26% debt to GDP (twice the allowed level) under the longest timeframe (20 years). To achieve this in ten years, a positive balance of 1.1% per year would be required, and over five years, a primary balance of 2.7% would be necessary.
Contextually, Fedea notes that Valencia has averaged a deficit of 1.7% per year over the past two decades; this is far from the green numbers Brussels seeks to reduce public debt. Martínez confirms to this publication that restructuring would be the optimal approach for Valencia’s debt. If that is not pursued, only a reform of the system that is highly favorable to autonomy or significant changes in revenue and expenditure could realistically fix the debt.
The elite body of European funds starts with only ten officials
Where I say 270 officers, I say ten. A substantial cut in Generalitat’s public employment plan aims to create an official body dedicated to managing European funds, with more than 4,000 enrollees (earning 13.76 euros) and 2,200 entering this test. When the consolidation plan was launched before summer, sources from the Public Function stated that a joint request for 267 positions had been filed after an inter-ministerial survey, yet Generalitat now claims it is filling vacancies as the process continues. It offers only a dozen positions, though they add that the postponed election is approaching and the doors remain open. The change has sparked anger among applicants, and they are exploring whether it is subject to appeal within the Autonomous sector of UGT Serveis Públics, while seeking clarity from the Generalitat.