2023-08-15 11:17:28
The massive public indebtedness continues to be one of the major headaches for the State and for the autonomous communities themselves, which in the last year have also had to face the extra spending they must assume to face the increased interest burden on their debt, in the current scenario of rate hikes by the European Central Bank (ECB).
This environment will cause this cost to be even higher in the coming years, at a time when the total balance of regional debt exceeds 322,000 million euros -23.7% of GDP-, according to data from the Bank of Spain to closing of the third quarter. The figure implies multiplying by five that registered at the time of the previous financial crisis. And according to a recent study by the Foundation for Applied Economics Studies (Fedea), while in 2022 the regional expense in interest on its debt was around 3,600 million euros, this year it will amount to 4,174 million.
And the figure will increase to 8,659 million euros in 2026. In other words, it will multiply by more than two the resources that the autonomies currently allocate to satisfy this financial burden. In other words: it will be necessary to dedicate 5,051 million euros more to service the debt than in 2022 (4,485 million if the estimate for this year is taken as a reference), money that will have to be taken from other spending items.
Fedea prepares its calculation based on the forecast that the regional treasuries must renew the debt they issued at low interest rates in the coming months and years, before the inflationary spike forced the ECB to undertake the fastest cycle of increases in its history. , passing its reference rate from 0% to the current 4.25% in just one year.
It must be taken into account that the average rate of the regional public debt in 2022 was 1.1%. In other words, the communities paid that cost to finance themselves. And Fedea estimates that this extra charge will double to 2.7% in three years.
The authors of the report also point out that the communities with part of their debt with the Financing Fund for Autonomous Communities have interest increases between 1.6% and 1.8%. While those that are not being financed in this way (Navarra, País Vasco and C. Madrid) experience an increase in the lower rate, of 0.9%.
“This is because the debt portfolio in these regions has a longer average life. However, these communities show higher rates than the others in 2022, by presenting a greater recourse to the market and financial liabilities with a longer average life, ”explain the experts.
Catalonia would be the region in which the situation seems most compromised, as it is also the one that assumes the greatest debt. This year it faces the payment of almost 1,170 million euros only in interest. And in 2026 the figure will be 2,412 million.
The situation has already been highlighted by other institutions such as Funcas, which just a few weeks ago pointed out that “if individual responsibility is analyzed in the growth of regional debt between 2007 and 2022, almost half of the increase (44% ) corresponds only to two communities: Catalonia and the Valencian Community».
In fact, and taking into account Fedea’s estimates between this year and 2026, the Valencian Community would be the second to suffer a greater increase in the cost of interest on its debt, going from an estimated 476 million in 2023 to 1,346 in 2026 Andalusia, Madrid, Castilla-La Mancha and Castilla y León would complete the top positions in this ranking to which nobody wants to belong.
consolidation
With this scenario of increased interest charges, Fedea experts, as other institutions such as the Bank of Spain or the Fiscal Authority (Airef) have already done, insist on the urgency of undertaking a long-term fiscal strategy to guarantee that the debt to GDP ratio –currently below 113% for the entire economy– will follow a downward path in the coming years.
And they criticize measures such as tax cuts that some regional leaders are putting on the table in recent times. “The CCAAs must be aware that embarking on significant tax reductions or spending projects of dubious social profitability would damage the sustainability of regional finances,” they warn. “In the coming years, a more expensive public debt must be paid which, given the vicissitudes of the moment, has hardly worried until now,” they add.
#rise #interest #rates #squeezes #debt #autonomies