The economic measure included in the investiture pacts that will have the greatest impact on regional finances will be the forgiveness of a part of the debt, which – according to different calculations – would range between 58,000 and 88,000 million euros. This means that the interest savings for the regional governments in aggregate and in the coming years would be between 5,000 and 7,600 million.
The calculations differ depending on who does them. The investiture pact between ERC and PSOE establishes the forgiveness of debt “originated by the negative impact of the economic cycle.” The association of Treasury technicians Gestha calculates that this agreement would involve forgiving regional debt via FLA (Autonomous Liquidity Fund) worth almost 58,000 million. Of that amount, around half would correspond to Catalonia and Valencia, with just over 14,000 million each.
Gestha estimates in the case of Catalonia a total of 14,647 million. A figure very similar to the 15,000 million that ERC and PSOE calculated in their agreement.
Fedea part of that amount reflected in the pact to calculate the impact on the rest of the communities. Fedea technicians estimate that the 15,000 million are equivalent to 1,980 euros per person. The report makes a projection with this data per capita and represents 88,000 million at the level of all communities.
The director of Fedea, Ángel de la Fuente, justifies in the report that “given that all the autonomous communities were also affected in a similar way by the Great Recession, the most reasonable way to extend the measure to other territories would be to forgive each community the same amount per adjusted inhabitant.” By doing so, obviously the most benefited territory is Andalusia, since it is where the largest population is located. It would be 16.4 billion. After Catalonia with 15,000 million would be Madrid, with 12,900, and Valencia, with 9,750.
De la Fuente believes that “the unconditional forgiveness of debt” included in the agreement with ERC is a terrible idea because it will aggravate the serious incentive problems” of the financing model. In his opinion, this movement would imply that communities could have the “perception” that “they can systematically spend more than they earn because in the end the State will rescue them in one way or another at no cost.” He states that it is “an invitation to fiscal indiscipline.”
Gestha recalls that the measure "is a simple internal adjustment with no external effects, so the level of Spain's public debt will be the same, and the commitments with the European Union would not be affected." The positive part is that the communities “would reduce part of the interest cost and better achieve the deficit objective.”
