Catalonia faces paying 32,000 million debt in the next legislature

The general elections of July 23 left Spain in a panorama of political uncertainty in which it will practically be necessary to juggle to find the key to governability. In this context, the tight results that came out of the polls have led the Catalan pro-sovereignty parties to achieve a key role in the future formation of the Government, putting on the table a series of demands that, on the economic level, go mainly through the cancellation of the debt that the autonomy has with the State. The figures give rise to building this entire story of demands. In the four years of the legislature of the eventual future Government alone, the Generalitat would face the payment of almost 32,000 million euros in debt, a figure in which the liabilities that the region owes to the State have an undoubted role, and of which the forces independentists want to be free.

According to the figures of the latest plan for investors presented by the Catalan Government, the region faces the expiration of 7,988 million euros in 2024, 7,828 million in 2025, 7,978 million one year later and another 8,097 million euros in 2027. In total, 31,891 million euros, the highest figure, by far, of all the autonomous communities. Of this amount, practically all of it – some 29,000 million – corresponds to the different liquidity mechanisms promoted by the State, among which is, for example, the one known as the Autonomous Liquidity Fund (FLA).

To get an idea of ​​the magnitude of these figures, it is enough to look at the numbers that the other three largest economies in the country have left reflected in their respective plans for investors. The Valencian Community, the second with the most combined debt, would face the payment of almost 25,000 million over the same period. Behind her would be Andalusia, with 13,870 million of all types of debt maturing, and Madrid, with just 11,400 million, almost three times less than the Catalan Generalitat.

The possible cancellation of the debt, therefore, promises to become one of the great workhorses of the negotiations that the current government in office will maintain with the Catalan sovereignist forces to try to revalidate the Executive. Among other relevant issues, the fringes will go through to see which funds are forgiven, since foreseeably all the amounts forgiven to the autonomous governments will have to be assumed by the State.

This nuance is not trivial. The regions of Spain owe the State as a whole some 187,000 million euros through the Financing Fund for Autonomous Communities, according to the latest data from the Bank of Spain that the territories themselves include in their respective plans. Of this amount, more than 71.8 billion, almost 40% of the total, correspond exclusively to Catalonia.

At a great distance are the Valencian Community, with 46,000 million (25%), and Andalusia, which adds 25,200 million, 13%. The Community of Madrid, like other regions such as the Basque Country or Navarra, does not maintain any type of obligation through this instrument. Others such as La Rioja, Asturias, the Canary Islands or Castilla y León remain below 2,000 million euros.

For all these reasons, it is foreseeable that the possible petition of the pro-sovereignty forces, once it is formalized, will cause rejection among the rest of the regions. For the moment, the complaints have come mainly from those territories that do not have debt with the State, but also from others that have been reducing their levels of liabilities year after year or from those in which what is contracted represents a very small percentage of their product. gross domestic (GDP).

The truth is that over the last few years the debt that Catalonia maintains with the State has only increased. According to the data from the Generalitat’s own plan for investors, the FLA grew between 2012 and 2021 to a total of 216,975 million euros distributed among all the territories, of which 77,343 million went exclusively to Catalonia, 35%.

The Generalitat also took most of the 70,000 million that nurtured the Financial Facility Fund between 2015 and 2021: almost 20,000 million, 28%. The trend continued in 2022, again led by the FLA. Of the 28,000 million from all the autonomies, 12,600 million (43%) went to Barcelona. And the same has happened in 2023. Catalonia owes 5,400 million of the 12,600 million from the FLA, with data available up to March 20.

Negotiation

The possible forgiveness of regional debt has endless aspects and possible consequences. From the outset, it seems obvious that the negotiation would have to include all territories in order to avoid possible comparative grievances and perks that could benefit some to the detriment of others. The problem that several regions have put on the table is that the amounts contracted through the FLA between them are sometimes light years apart.

A few days after the 23J elections, and before the holiday break that August brought, the acting Minister of Finance and number two of the PSOE, María Jesús Montero, assured that it was still “hasty” to talk about canceling part of the debt Catalan in exchange for the support of the pro-independence parties for the investiture of the acting president, Pedro Sánchez. “It is right now to anticipate a debate that is not yet on the table,” she said.

At the moment, according to government sources, different possibilities are being studied, although there is still no proposal on the table. One of the options is to forgive only a part of the indebtedness, although it remains to be determined if this exemption is carried out through a series of specific percentages by territory or if, on the contrary, it is linear.

The debate on the possible cancellation of the debt is closely related to the possible reform of the regional financing system to update a model that has expired for almost 10 years. This scheme, which distributes a series of economic resources among the common regime regions so that they can pay for essential basic services, is harshly criticized by territories such as Catalonia, which complains that it receives less than what it contributes. Last week, with the new course underway, Montero announced that the reform of the system will be a “priority” in the next legislature and that the Government will give a “push” to the negotiations. The great challenge, which could not be achieved in the previous legislature, is to reach an agreement between 15 territories that are trying to row towards home to obtain the best possible figures.

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