The PSOE launches new funding as bait to retain Congress

As a first bait, without concreteness, the PSOE yesterday put on the table the reform of the regional financing model, in force since 2009 and expired nine years ago, as an element to be debated during the negotiations to try to secure a majority parliamentary to defeat the PP in the first major vote of the legislature, the one on the 17th in the Congress of Deputies.

Oliver Thansan
Oliver Thansan
01 August 2023 Tuesday 11:09
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The PSOE launches new funding as bait to retain Congress

As a first bait, without concreteness, the PSOE yesterday put on the table the reform of the regional financing model, in force since 2009 and expired nine years ago, as an element to be debated during the negotiations to try to secure a majority parliamentary to defeat the PP in the first major vote of the legislature, the one on the 17th in the Congress of Deputies. The numbers today are not defined, but the proposal opens the initial approximations so that Pedro Sánchez can save the first match ball that allows him, first of all, to control the presidency and the Bureau of the Lower House, and then flatten a possible investiture after the round of consultations with the Head of State. The path is long and complex, but the acting Prime Minister is willing to explore it.

Reforming the regional funding model is a recurring demand from underfinanced communities, such as Catalonia (where Foment and the Economic Circle spearhead the demand) or the Valencian Community, among others, but no government, nor neither Mariano Rajoy's nor Pedro Sánchez's has dared to take the step due to lack of quorum. The PSOE confirmed yesterday with a rare "we are talking" that it has already activated the initial contacts for the first stop on the 17th and added that new funding from the autonomous communities will be part of the talks.

The Minister of Finance and Public Service, and Deputy General Secretary of the PSOE, María Jesús Montero, defined the reform of the system as "urgent". The will of the Socialists is to attempt an agreement at the beginning of the next legislature, government sources explained yesterday. Broad-minded but aware of the difficulty of being able to unite all positions. "The principles are clear: sufficiency and fiscal autonomy of the autonomous communities", they added from the Central Executive to define the main lines of the approach they want to promote.

The Treasury already made an approach during the last legislature to reform the regional financing system. He did it with the intention of proposing, at the same time, a fiscal harmonization in the face of the downward tax policy applied by the Community of Madrid and Andalusia, among other territories. But the talks did not advance at any time, neither in the technical nor in the political field.

Reforming regional funding seems a complicated task at the moment. Firstly, because of the position of Catalonia. Pere Aragonès stated yesterday that the intention of the Catalan Executive is to negotiate with the Central Government to reduce the regional fiscal deficit, but he added that he will not participate in a multilateral negotiation with the rest of the regional governments. "We will not negotiate a new financing model with other autonomous communities; we will defend that the fiscal deficit of our country is reduced", pointed out the president, and indicated that he does not consider it useful to dialogue in a body, the Council of Fiscal Policy and, even more so, over the next four years by finance ministers of the People's Party

A financial negotiation between you and Catalonia would affect the core of the state autonomous model. The Central Government was cautious yesterday and advocated addressing the future discussions within the framework of the Fiscal and Financial Policy Council, although sources from the Treasury were sensitive to the demands of the Catalan Government: "We will see what they propose".

What does cool the Catalan Executive to propose at this moment is the proposal of a fiscal pact to achieve its own financial regime, similar to that of Navarre. It is not a renunciation, however, of his approaches, but a matter of pragmatism in the current situation. "We will position ourselves so that Catalonia obtains the maximum resources", explained Aragonès.

One of the possibilities that can be opened up in the negotiation, and which has already been mentioned by socialist positions, is to apply a debt write-off that some autonomous communities have contracted with the State. In the case of Catalonia, this debt amounts to 84,500 million, of which more than 71,000 belong to the Autonomous Liquidity Fund (FLA) devised by the former Minister of Finance, Cristóbal Montoro, in 2012. It is not an improvised initiative. The PSC, in the electoral program with which it presented itself in the Catalan elections of 2021, proposed a "forgiveness by the State of part of the debt, in the case of those autonomous communities that have been objectively more badly treated by the current system and a possible restructuring in some cases". Catalan socialists have also been defending for years a federalized treasury and the creation of a tax consortium, that is to say, a body that collects and manages the taxes paid in Catalonia under a co-responsibility regime with the Tax Agency.

The possibility of the State ending up reorganizing or forgiving part of the debt of some autonomous communities caused a disparate reaction between autonomous barons of the PP and the PSOE. The president of the Generalitat Valenciana, Carlos Mazón, added to the claim and suggested negotiating "compensation" formulas within the Fiscal and Financial Policy Council, "and not in a dark room", with reference to a bilateral relationship with Catalonia Compromis also warned Sánchez that he will not have his vote if this problem is not resolved. His community owes the FLA more than 46,000 million.

The Government of the Community of Madrid, chaired by Isabel Díaz Ayuso, took a completely opposite position and warned that it would go to court if a remission of the regional debt takes place.

On the socialist side, the acting president of Aragon, Javier Lambán, defended the initiative and proposed "putting an end to grievances between communities".

Yesterday, the Ministry of Finance lowered expectations regarding an urgent reform of the regional financing model - "it cannot be done in a week", the ministry indicated. The PSOE raises it, therefore, as another piece in the parliamentary contacts. Sánchez continues to require that neither Junts nor the PNB bet on any PP candidate for the presidency of the Congress of Deputies, so the talks, as assumed in Moncloa, could be extended until the 17th itself. The government negotiators they are not on vacation