Spain funding plan: central spending must fall
Spain’s new regional funding plan must be matched by a cut in the central government’s spending capacity if it gives the regions more room to spend, the fiscal watchdog says. Inés Olóndriz, president of the Independent Authority for Fiscal Responsibility (AIReF), set out the warning at the Fiscal and Financial Policy Council in Madrid on 4 September. Without an equal reduction, Spain’s countable public spending would rise overall and could undermine sustainability.
AIReF is not taking a position on how money should be divided between administrations or on the final shape of the funding system. It says those are political choices for the government, the regions and ultimately lawmakers.
Two unanswered questions
The watchdog says it cannot yet give a final verdict on the reform’s effect on sustainability. Two key details still need to be settled.
For 2027, the agreement allows the percentage used for advance payments to sit up to three percentage points below 95%. AIReF says the effect on the regions’ actual funding in the first year must be calculated, and the later arrangements need to be made clear.
The deal also leaves future legislation to decide how additional regional spending, paid for with the new permanent funds, will be excluded from Spain’s national spending rule. AIReF says the agreement does not say what that could mean for other parts of the public sector.
Debt gaps between regions
The watchdog also points to wide differences in regional deficits and debt. It wants the scope of the planned legal change spelled out.
Any reform must also fit Spain’s European path for primary net spending and the commitments in its Medium-Term Fiscal and Structural Plan, AIReF says. It will complete its assessment as the legal details of the scheme take shape.
Source: Europa Press / Mallorca.com