The high volume of debt that a good part of the Autonomous Communities are accumulating and the increase in interest rates will force regional governments to multiply by 3.3 – over the next three years – the resources that were dedicated in 2022 to meet the financial expenses derived from its liabilities. According to a report published by Fedea, two years ago, the autonomies used 3.608 million euros to meet their obligations. This figure will rise to 12.037 million euros in 2027. The entity recalls in its analysis that the average rate was 1.1% in 2022, but that it would increase to 3.5% in three years. “This represents a cost more than triple that currently in force,” the document states.
Madrid, which starts as the community with the highest rates – 2.2% in 2022 – must pay 4.2% in 2027. Asturias, the Canary Islands and Castile and Leon will also face an average rate above 4%. This is why Fedea demands that regional governments exercise restraint in fiscal policy. The report recommends end tax cutsat a time when the regional barons of the PP have launched a deep fiscal offensive. Practically all the Autonomous Communities governed by the Popular Party have approved reductions in the regional section of the income tax or bonuses on taxes such as inheritance and donations. “In the coming years, the Autonomous Communities will have to undertake a process of fiscal consolidation with the aim of reducing their level of indebtedness and placing it at the level of 13% established in the Stability Law,” emphasize the authors Manuel Díaz and Carmen Marín.
The adjustment could be greater if AIReF’s predictions are met. The organization predicts that – this year alone – the autonomous communities will experience a deficit of 0.3%, two tenths above those established by the regulations. The imbalance in the accounts will come from a drop in income, but – above all – from an increase in expenses greater than that expected. In fact, the territories that have lost the most income due to tax cuts, such as Andalusia or Madrid, will have to increase their spending on the liabilities side by 1,001 million and 833 million euros, until 2027. Although, according to Projections Fedéa, Catalonia and the Valencian Community will be the territories that will have to spend the mostr to the payment of the increase in interest on its liabilities. The Executive – recently inaugurated by Salvador Illa – will have to divert 1.928 million euros more in 2027, than those allocated in 2022. Those of Carlos Mazón will have to increase their interest expenses by 1.532 million over the next three years.
Urgent reform of regional financing
To face this increase in financial obligations, Fedea recalls the “urgent” need to undertake a reform of regional financing. The Government continues to study how to face the renewal of the system in one of the moments of greatest tension between the administrations. The “singular” financing agreed with the ERC for Catalonia has aroused a deep rejection on the part of the rest of the regional executives, including the socialists of Castilla-La Mancha and Asturias. The first vice-president insisted a few days ago that other Autonomous Communities will also be able to benefit from a single financing, “other territories that are destined to have it can have it”, she assured.
Furthermore, the analysis sees as key the gradual withdrawal of emergency financing mechanisms materialized through the Autonomous Communities Financing Fund (FFCCAA) or the Autonomous Liquidity Fund (FLA), “we must not forget that approximately 60% of the CCAA’s debt is in the hands of the State”, recalls the document. However, the authors recall that this process will not succeed without the implementation of a “credible process” of fiscal consolidation by the regions. A process that will not be easy. The entity recognizes that reducing expenditure will be “more than complicated”, in a context such as the current one with the increase in health and social expenditure linked to the aging of the population, the expected increase in interest charges and, in addition, the reduction in investment expenditure. For all these reasons – insists the Fedea – “we consider it a priority to implement a credible medium-term budgetary strategy, which guarantees the sustainability of public accounts”.
