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The Spanish government has announced plans to write off €83.5 billion in debt owed by the autonomous communities, a move that Finance Minister María Jesús Montero claims will benefit all common regime regions, though not everyone agrees, with the Region of Murcia’s government saying it will reject the help.

 

The proposal, which will be presented at the Fiscal and Financial Policy Council (CPFF) meeting this Wednesday February 26, aims to alleviate financial burdens on regional governments and improve their access to financial markets.

 

The debt remission initiative was originally part of a 2023 investiture pact between Spain’s ruling Socialist Party (PSOE) and the Catalan pro-independence party Esquerra Republicana de Catalunya (ERC). Initially, the deal promised a €15 billion write-off for Catalonia, but this figure was later increased to €17 billion based on what Montero described as “technical criteria”.

 

Under the proposal, 75% of the debt remission will be allocated based on the adjusted population criterion, while the remaining 25% will prioritise underfunded and highly indebted regions, as well as those that have leveraged their fiscal powers to increase personal income tax.

 

The biggest beneficiaries in gross terms will be Andalucía (€18.8 billion), Catalonia (€17.1 billion), Valencia (€11.2 billion) and Madrid (€8.6 billion). However, when adjusted per capita, Valencia (€2,284 per inhabitant) and Catalonia (€2,220 per inhabitant) stand to gain the most.

 

Montero emphasised that the measure represents an “unprecedented” effort to strengthen regional finances and ensure a more stable economic future for all autonomous communities under the common regime.

 

Despite the widespread benefits promised by the Spanish government, the Region of Murcia has firmly rejected the proposal. Like other autonomous regions governed by the conservative People’s Party (PP), Murcia views the debt cancellation plan as a politically motivated move that unfairly favours Catalonia.

 

Murcian Finance Minister Luis Alberto Marín condemned the measure, stating, “It is an offence and a new privileged treatment for Catalonia.” He argued that the deal “deepens an unequal Spain of first and second-class citizens” and fails to address the fundamental issue of underfunding.

 

Murcia was allocated a debt write-off of €3.3 billion, equivalent to €1,615 per inhabitant and representing a 27% reduction compared to its 2023 debt levels. However, the regional government criticised the methodology used by the Treasury, pointing out that Murcia ranks sixth lowest in per capita debt relief.

 

Instead of a debt write-off, the Murcian government insists on a complete overhaul of the regional financing system, which it argues would offer a fairer and more equitable distribution of state funds. Marín accused Prime Minister Pedro Sánchez and Minister Montero of manipulating public funds for political gain, particularly in the way debt relief percentages have been allocated.

 

“The Fiscal and Financial Policy Council should serve to update the regional financial system, because, of all of Spain, we in Murcia receive the least from the Spanish government,” he asserted.

 

As the proposal moves forward, tensions between the central government and certain regional administrations are likely to persist. For now, the debt remission scheme still requires approval as an organic law, and a long parliamentary debate is expected before any definitive resolution is reached.

 

Image: La Moncloa