He Government took the first steps to develop the 2025 regional budgets. In the preparation of public accounts, the budget orientation report prepared annually by the team of the Ministry of Economy usually has a lot of weight. This document, published for the last time in June, still under the presidency of Father Aragonès, opens the door to the possibility that the Generalitat return to financial markets from next year to meet your borrowing needs.
If this scenario were to come true, the Generalitat’s public finances would be disrupted. Since 2012, the regional administration has been financed almost exclusively by different state mechanisms, both to cover the repayment of the outstanding debt and to cover the deficit of the budget year. Since 2014, these instruments have been grouped under the name of the Autonomous Communities Financing Fund (FFCA). The best known is the Autonomous Liquidity Fund (FLA)of which between 2012 and 2023 Catalonia received 102.622 million euros. This allocation represents almost 40% of the entire FLA and, precisely, his partial guarantee was part of the negotiations between the PSOE and the ERC.
According to the technicians of the Generalitat, the prospects of the economic situation will allow to probe the markets again in search of capital. From the department now led by the socialist Alicia Romero It is emphasized that the agencies of rating They have improved the credit rating of the Catalan bond since 2021. Thus, it has gone from the speculative category, known colloquially as junk bond, to the investment category.
It is then stressed that if autonomy has not yet knocked on the investors’ door, it is not due to the agency’s rating but rather to the conditions set by the State to go to the markets while receiving resources from the FLA. These guidelines include the deficit target and the average payment period of suppliers.
The Catalan government violated both conditions in 2019set as a reference given that with the Covid pandemic and then, with the escalation of inflation and the war in Ukraine, the rules of budgetary stability were suspended during the period 2020-2023. As a result, the Government was unable to simultaneously collect the FLA with the private placement of bonds.
Progressive return
Literally, the analysis states that “in view of the coming years, it was considered that Catalonia would meet the necessary conditions to gradually enter the markets. However, the high volume of financing needs of the Generalitat will require that it continue to rely heavily on compliance with liquidity mechanisms”. Therefore, It seems feasible to meet the government’s deficit target of -0.1% for the years 2025, 2026 and 2027, thanks to which the communities have gained two tenths of additional tax margin.
In any case, the return to the situation before 2012, when the solvency of the Generalitat collapsed and it was forced to request a rescue plan from the State, will be very slow. Economists advise They plan to issue 5% of total debt in 202510% in 2026, 15% in 2027 and 20% in 2028. The state’s lifeline will therefore continue to be essential while the tax rulesdespite their relaxation, will continue to shape the economic policy of administrations.
On the other hand, it is estimated gradual reduction of debt in relation to its weight on GDP. In 2025, the debt/GDP ratio would be below 30%, reaching 28% in 2028. In 2025, Catalonia’s outstanding debt would reach almost 89 billion.
These amounts do not include certain matters pending execution. The largest is the 15 billion FLA remittancea commitment that the Republicans agreed with the PSOE last fall and that came to the fore in the negotiations to invest Salvador Illa. Its materialization would reduce the percentage of debt on economic activity.
Let us recall that the 2022 orientation report already mentioned the hypothesis of new issues on the debt markets. The study was carried out during the post-convergent period Jaume Giro He held the economic portfolio of the Catalan executive. But this scenario depended on a relaxation of the debt conditions by the Ministry of Finance, which never happened. The budgetary recommendations at the Giró stage speculated on a commercialization in 2023, also with an initial investment of 5%.
Interest Alert
The new Government conducted alone by the CPS does not necessarily have to be totally linked to the content of the document which nevertheless retains its prospective value. Thus, it is recalled that the The expenditure commitments in the administrative public sector in charge of future years amount to 5.175 million by 2025 already a total of 16.156 million for the four-year period 2025-2028. It goes further and estimates at 20.5 billion the amount that the regional administration will have to assume between 2029 and 2060 in terms of concessions or other long-term obligations, such as the payment of surface rights, fictitious tolls or investments programmed by transport operators controlled by the State. the Generalitat.
It is also warned that despite the enormous volume of public debt, the Generalitat has managed to reduce the interest burden until 2022 thanks to low interest rates. The change in monetary policy of the European Central Bank, despite the 0.25% decrease that occurred last week, changes this situation and leads to a context of more expensive interests. Adding to this the relatively short life of the average debt portfolio (5.2 years), a significant increase in interest charges is expected in the coming years.
