2023-11-22 12:30:34
The Foundation for Applied Economics Studies (Fedea) warns that “the unconditional forgiveness of regional debt” included in the investiture agreement of Pedro Sánchez between the PSOE and ERC “is a terrible idea because it will aggravate the serious incentive problems that it already suffers the financing system of the common regime autonomies”.
In an analysis published this Wednesday on the economic content of the investiture pacts, the executive director of Fedea, Angel of the Fountain, “in view of previous experience, any reduction not subject to strict adjustment conditions will tend to confirm the perception that the autonomous communities already have of who can systematically spend more than they earn because in the end the State will rescue them in one way or another at no cost to them and constitutes, therefore, an invitation to fiscal indiscipline.” From De la Fuente’s point of view, “in order to encourage fiscal irresponsibility, the agreement is difficult to overcome”.
De la Fuente: “In order to encourage fiscal irresponsibility, the agreement is difficult to overcome”
The governor of the Bank of Spain, Pablo Hernández de Cos, has also warned about the contraindications of regional debt forgiveness. This Monday, in a public event, he warned that the reduction of the regional debt agreed by the PSOE and ERC is just a patch that has once again highlighted the “old problem” of the Spanish regional financing system. “We have a financing system that we have never considered completely closed, in which ultimately the fiscal imbalances of the autonomous communities, deficits and public debt, become not an indicator of good or bad management by the regions, but an indicator of resource insufficiency“, held.
The governor is concerned that the insufficiency of resources will serve as an excuse for the rescue of the State, as happened years ago with the autonomous financing fund (FLA) of the Government of Mariano Rajoy (PP) or the reduction that the Government has now committed to promoting. Sánchez executive.
An estimate of 88 billion
The investiture agreement between PSOE and ERC included the commitment to forgive Catalonia 15,000 million euros of debt contracted by the Generalitat with the State, through the Autonomous Liquidity Fund (FLA). The PSOE also committed to extending the condonation to all other common regime autonomies (all, except the Basque Country and Navarra).
The 15,000 million that will be forgiven to Catalonia are equivalent to 20% of the debt contracted with the FLA. Fedea, for its part, calculates that those 15,000 million are equivalent to 1,980 euros per inhabitant adjusted (with data from 2021) and estimates that extending this relationship to the rest of the regime communities “would generate a total cost of almost 88,000 million euros, of which 16,400 would correspond to Andalusia, 12,900 to Madrid and 9,750 to the Valencian Community.”
The Government, however, has not yet specified what exact criteria will be applied in the generalization of the forgiveness of regional debt. The agreement with ERC only refers to compensating for the greater debt incurred by the communities during the financial crisisand refers to the period between 2007 and 2014.
In this sense, the reduction of 15,000 million from Catalonia is equivalent to 31% of the additional debt that it accumulated in the previous financial crisis. If the State assumed almost a third of the debt accumulated by all the autonomies in this period, the total reduction would rise tous 55,000 million. But this, like everything above, is just a calculation hypothesis, waiting to know the mathematical formula that the Treasury will apply.
Investiture pacts
In the article published by Fedea, Ángel de la Fuente analyzes the economic impact of the investiture and legislative agreements reached by the PSOE with Sumar, ERC, Junts, PNV, BNG and Canarian Coalition.
Related news
The author points out that the pacts leave many important issues open, sometimes limiting themselves to opening a negotiation process to whose progress the continuity of the legislature by the nationalist parties is subject.
To begin with, however, the author maintains that the texts analyzed raise at least two risks and one certainty. The certainty is that the general and unconditional forgiveness of a part of the debt of the common regime communities will contribute to aggravating the problems of fiscal indiscipline that they already suffer,” he points out. “The risks They have to do with economic growth, employment and sustainability of public accountson the one hand, and with social and territorial cohesion on the other,” he adds.
#Fedea #warns #debt #forgiveness #autonomies #aggravate #fiscal #indiscipline