The forgiveness of debt to Catalonia -and any administration- is an immense mistake that the Government continues to insist on carrying out, which in the long term will scare away investment. Pedro Sánchez promised the Catalan independentists forgive a part of Catalonia's debt issued by the FLA in exchange for the votes received for his investiture.
Given all the atrocities of the agreements that Sánchez has reached, perhaps the issue of debt forgiveness is not the worst of all from a social and political point of view, but it also weakens Spain, by representing a loss of credibility in the economy, in its reliability, by raising a barrier to investors, by introducing insecurity in who is going to assume the future debts that Catalonia incurs. Insecurity that spreads and harms the Spanish AAPP as a whole, because when you doubt one, you doubt all of them, due to the contagion effect.
He forgive the debt, it does not matter if it is all or part, it is a legal and economic outrage. It is a legal outrage, because when it is carried out at the dictates of Catalonia and, specifically, for Catalonia, it becomes unconstitutional, because it violates article 138.2 of the Spanish Constitution, which says: «The differences between the Statutes of the different Autonomous Communities may not imply, in no case, economic or social privileges.
And what is this measure, if not a measure that grants privileges to a region? On the other hand, article 157.3 of the Constitution establishes that the financial powers of the CCAA, which are listed in article 157.1 of the Constitution, may be regulated by organic law, including credit operations. And this is regulated in the LOFCA, in article 14.
Likewise, in said organic law, the eighth DA contemplates the possibility of deducting from the resources of the SFA the amounts necessary to attend to additional financing mechanisms, such as the FLA, if they are not attended to by the autonomous community. Sánchez, instead of ensuring compliance, blows it up and gives them that amount. And even if they extend it to all the CCAA to try to overcome the non-compliance with article 138.2 of the Constitution, mentioned above, it will still be a privilege, since it is done to benefit Cataloniabecause in the PSOE's own agreement with ERC it is specified that the operation will involve the assumption of 20% of Catalonia's outstanding debt with the AGE.
Therefore, it is a unilateral operation, which would violate the Constitution – although this will not worry Sánchez, because but he fails to comply with the amnesty– no matter how much it later tries to extend to the rest. Additionally, they are guaranteed that the FLA will continue to attend to Catalonia's debt if necessary, who knows if it will forgive another part or all of it in a while, depending on what Sánchez needs to continue at the head of the blue bank for a while longer. .
And it is also a economic and financial atrocity, because it sends a terrible signal as a country: what investor is going to trust any autonomous community when it comes to financing it, if they can not be responsible for the debt they issue with this system devised by Sánchez to obtain the votes of the independentists? This is very serious, because it weakens the credit credibility of the entire Kingdom of Spain, which will make access to the markets and the cost of financing both for the Treasury and for all Spanish AAPPs more difficult.
It is true, as some friends and acquaintances tell me, that this is not going to be noticed in the short term, but that even the investors, the bondholders, will take advantage of it to do arbitrage, but that happens because right now all the debt is backed, of course. one way or another, by the ECB. Now, what will happen if, at some point, the ECB stops supporting sovereign and sub-sovereign debt? That the risk will increase, the debt will be placed worse in the markets and the cost will be higher. Now it is not seen, but that, in an adverse environment and if the ECB has to stop supporting it, it will happen.
In fact, as I already wrote in OKDIARIO, S&P and Moody's have already warned of the risk of worsening the credit quality of the Kingdom of Spain if this assumption of the debt by the General State Administration occurs, and since no region can have better qualification that the AGE, since between 70% and 80% of its income depends on the Autonomous Financing Systemthey will all get worse.
With this measure, Those who do it wrong are rewarded, those who do it well are punished. and doing it wrong is encouraged, with the money of all Spaniards. It is unconstitutional discrimination against the rest of the regions (article 138.2 of the Constitution) and a very serious error from an economic and financial point of view. And if all the CCAA are forgiven an equivalent part of the debt over their GDP equivalent to what they are going to forgive Catalonia so that it is not unconstitutional, discrimination may disappear – although not of origin, because the measure is taken and calculated to benefit Catalonia, as is clear when reading the text of the agreement between PSOE and ERC – but the economic and financial error does not disappear.
And this economic and financial error does not disappear because, first of all, what credibility is going to be given to the economy of a country with administrations of different levels that, if necessary, can endorse that debt to the higher administration? What if one day that higher administration does not cover it, because there is, today, nothing that forces the General State Administration (AGE) to respond for the regional and local debt? It generates tremendous insecurity in the long-term market, no matter how much in the short term, as I say, investors can benefit from the aforementioned arbitrage, but life and the economy, except for the failed Keynesian approach, is much more than the short term.
Additionally, this error is increased because if a region is given the debt for free, why will it comply if it is free for it to borrow more? With that, spending is encouragedhe deficit and the indebtedness, which will grow, thus, both in absolute values and in terms of GDP, harming, once again, the credit quality of the Kingdom of Spain. It will not be noticeable, I insist, as long as the ECB maintains assisted breathing as its backup, but that may come to an end – it must come, in fact – at some point.
And from the point of view of principles and values, the responsibility of doing good management, of being efficient, of not wasting, of evaluating the budget flies through the air, because it does not matter if it is done well or badly, because irresponsibility will be covered.
There was a time when managers took responsibility for their actions and tried to do it in the best possible way, but that is now put in danger with this measure: Sánchez, apart from having achieved the independence votes for his investiture, seeks discourage compliance, which is very serious. For this reason, the rest of the CCAA should not fall into the temptation of asking for their debt to be forgiven as well. It is something very human, because they see before their eyes how an injustice is committed, but they must denounce it and fight it, defending orthodoxy. They must raise the flag of seriousness and say: “I want to pay my debts and I want everyone to pay theirs,” because if they go on to defend something else, no matter how humane and understandable it may be in the face of such injustice, it will be a mistake.
No autonomous community should ask for debt forgiveness, it would be a mistake and would whitewash Sánchez's decision. What's more: the CCAA should think that if they request that their part of the debt be forgiven, they will be sending a signal to the market to distrust them, because they will not be trustworthy by not responding to their obligations. They will be failed administrations and that is how the market will be able to deal with them. It is a measure, therefore, to which you have to oppose energetically and frontally, because it is harmful to the entire economy and employment, without falling into the temptation of collaterally taking advantage of the Catalan independence blackmail to which it subjects Sánchez. Debts must be paid.