The CCAA are preparing to further contain spending in the face of the slowdown in the economy

The autonomous communities will have to approve 2024 budgets that are more restrictive than they had anticipated and this, despite the fact that in practice they are approaching this task almost blindly. The interim nature of the Central Government means that they do not have key figures such as the payments on account that they will receive from the financing system, which represent around 80% of their income and which this year alone have shot up by 24% to the historical figure of 134,336 millions; and they also do not have the deficit and debt objectives or the spending ceiling.

The latter is the one that now generates the greatest concern and the one that would force regional executives in practice to be more conservative in the preparation of their accounts than they probably would have liked, even more so at the threshold of an economic slowdown that It’s intense. In its Quarterly Report on the Spanish Economy, the Bank of Spain forecasts more persistent and higher inflation rates between now and 2025 than it had estimated in June, in a context in which GDP will grow less over the next two years. s next exercises.

The regional budgets for 2024 face a significant incoherence; On the one hand, the Update of the Stability Program 2023-2026, which the Executive sent to Brussels at the end of April, requires that the communities close next year with balance in their accounts (0% deficit) but this, given the forecasts of income and above all the liquidation of the 2022 regional financing system – which they will receive in July 2024 and which could be around the huge amount of 20,000 million euros – would de facto entail raising spending well above the 2.6% recommended by the European Commission to Spain. In fact, the Independent Authority for Fiscal Responsibility (AIReF) places it at around 9 or 10% under these conditions.

“Without new fiscal rules, making common sense is going to be very complicated”

To put that figure of 20,000 million in context, we must take into account that the 2021 settlement – which they received last July – was 11,798 million in favor of communities and local entities. The collection of that year was much higher than expected, reaching 223,385 million euros, so the compensation that the State has had to make this year has increased its deficit to 2.68% in the first seven months of the year. anus. According to the current financing model, which expired in 2014 and no Government has since reformed it, the State must deliver each year to the autonomies an amount of money on account (depending on what it will calculate that it will collect). Two years later, the Central Administration settled with the territorial executives based on what they received at the time.

“Without fiscal rules (the current ones have not only become outdated but lack credibility) putting common sense into this is going to be very complicated,” Diego Martínez López, professor of Economics at the Pablo de Olavide University and researcher, told this newspaper. by Fedea. From his point of view, a possible solution would be to spread that “impressive positive settlement” of 2022 over several years. The autonomies could receive a part in 2024, another the following year and, so on, successively. This would prevent spending capacity from overflowing at a time when Spain will have to once again adhere to the fiscal framework established by Brussels if it does not want to expose itself to the Commission opening an excessive deficit procedure.

The possibilities offered by the Stability Law

Martínez López recalls that negative settlements have already been forgiven and/or split up previously to provide facilities to regional governments, so it would now be up to the regions to make that effort. Another complementary solution to the previous one would be to apply – for the first time – article 12.5 of the Organic Law on Budgetary Stability and Financial Sustainability of Public Administrations (LOEPSF). This establishes that “the income obtained above what was expected will be used entirely to reduce the level of public debt.” The territories could therefore be forced to repay said debt even if not all of them need it to the same magnitude.

In the event that the application of this article is “very restrictive” (What is considered above what is foreseen?), the expert is committed to trying to apply 32.1, which establishes that the autonomies and local entities “that request the State the access to extraordinary liquidity support measures or have requested it during 2012, will be obliged to agree with the Ministry of Finance and Public Administrations on an adjustment plan that guarantees compliance with the objectives of budgetary stability and public debt.”

Responsibility in the face of the coming economic slowdown

In principle, the revision of the economic forecasts for next year that the main national and international organizations have been making – the OECD recently placed it at 1.9% and the Bank of Spain has lowered it by four tenths to 1, 9% – are being very moderate, so they should not substantially affect public revenues. And, although this message is difficult to fit politically for territorial governments, a reduction in income in this sense could cushion the increase expected by the liquidation, and temper the growth of spending a little.

The president of AIReF herself, Cristina Herrero, recalled on Thursday that “the economic and fiscal situation requires responsibility at all levels of the Administration.” The head of the auditing body pointed out that, given the more than foreseeable extension of the General State Budgets (PGE) next year, Spain will only be able to reduce the deficit to the committed 3% if it completely withdraws the extraordinary measures that were tried to confront the energy and price crisis (which is equivalent to around 1.1 points of GDP) and if this withdrawal is also accompanied by a containment of spending by the territorial administrations.

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September 22, 2023 9:46 pm