The Government's Agreement That Will Be Delivered to the Communities Hides a Punishment for Madrid

The Government's proposal to forgive a large part of the Autonomous Communities' debt continues to be a topic of discussion. After negotiations with ERC, it has sparked strong opposition in regions governed by PP.

The finance officials of these communities have expressed their rejection. They plan to vote against it during the meeting of the Fiscal and Financial Policy Council (CPFF) to be held this Wednesday. The measure, presented by the Vice President and Minister of Finance, María Jesús Montero, has been a plan specifically designed to benefit Catalonia.

The proposed scheme, divided into three phases and agreed upon solely with ERC, creates significant differences among the regions. All due to the criteria used by the Treasury to determine the distribution of the forgiveness. This reduction will be assumed by the central Government.

The methodology applied by Montero's team, who also leads the Andalusian PSOE, favors certain autonomies over others.

In Catalonia, the adjustment even exceeds the 15 billion euros that Oriol Junqueras requested in 2023 in exchange for supporting Sánchez's investiture. Finally, the proposed figure amounts to 17.104 billion euros.

Madrid, meanwhile, will see its debt reduced by 8.644 billion euros, which represents 49.46% less than the amount allocated to Catalonia. A community that, if the proposal is approved, would come to be governed by Salvador Illa.

Despite Madrid receiving per capita funding similar to Catalonia's, it will not benefit from the additional adjustments that the Treasury has granted to other communities.

The reason is that the region has managed its resources in accordance with its revenue, without incurring excessive debt. In contrast to other autonomies, Madrid did not resort to the Autonomous Liquidity Fund (FLA) but went directly to the markets. As a result, the debt reduction per inhabitant will be 1,235 euros, placing it 461 euros below the national average.

The Fine Print That Harms Madrid

Another detrimental aspect for Madrid is a clause in the agreement that states that if the community agrees to adhere to the measure, it will receive an even smaller amount than initially planned. This represents an additional penalty for those autonomies that have managed to maintain financial stability without resorting to excessive debt.

In particular, the third section, point five of the document. It states that the assumption of debt will only cover the outstanding principal, excluding accumulated interest and other related expenses. This means that Madrid will have to continue assuming the caused interest, which is higher than the State's within the FLA.

As a result, the region will have to face these financial costs, thus benefiting creditors, such as banks, in cases of early repayment.

In conclusion, while the consolidated State debt will increase and that of the communities will decrease, Madrid will be at the bottom. It will be the one that gains the least advantages from this forgiveness due to the need to cancel its debt in advance.