Consell plans to request the Government to transfer about $1,500 million annually to the Valencian Community to address long-standing underfunding until the financing system is repaired. The overarching aim remains to reform how funds are distributed, but given the low likelihood of quick change, Finance Minister Ruth Merino and a panel of finance experts yesterday endorsed a pragmatic path focused on prioritization. A stabilization fund is to be included in the next General State Budget.
Yesterday, Carlos Mazón’s new Council gathered the council of financing experts for the first time. Reform of the system sits at the center of national politics, prompting Merinos to ask experts to refresh and update the reports and data prepared in recent years to reflect ongoing complaints about regional autonomy funding.
The councilor criticized the Government’s inaction and urged political will to present a reform proposal. Until that step is taken, Merino stated that Consell will fulfill its duties and urged experts to update the current scenario and enter the next meetings with the ministry armed with precise data.
The first challenge identified is the inclusion of the equalization fund, a mechanism the Valencian Community has sought in recent years to offset the reduced resources available to its financing system. The investment agreement between PSOE and Sumar states that state accounts will guarantee the provision of public services in the Generalitat and other underfunded communities at the same level as the rest of the State.
The Treasury chief emphasized that adding this leveling fund is important, noting that reforming the system is a complex task that requires courage because reaching consensus across all regions is difficult. Political will is the key factor.
They remain on the table
Francisco Pérez of Ivie highlighted three issues from the 2017 report that the group wants to update: financing system reform, the stabilization fund, and debt forgiveness. Pérez agrees with Merino that the stabilization fund is the simplest option, but the commission will also tackle the other two items.
No one offered a precise estimate of the potential savings for Valencia. The councilor attributed the uncertainty to unclear government conditions for the proposed reduction, which was negotiated with Catalonia and could later apply to other autonomies.
Nevertheless, Pérez provided further guidance. Calculations will consider not only the effects of the income reduction stemming from the 2008 financial crisis, agreed with Catalonia, but Valencia’s case will also include a factor for relative underfunding. This adds to the expected impact when determining how funds flow to the region.
The final component still to be updated concerns the total forgivable debt. Pérez indicated the estimate would be released in the coming weeks, though Ivie’s latest projection had placed this figure around 17 billion euros previously. The total forgiving debt is projected to be at least around 27 billion euros.