Singular financing, squaring the circle

The numbers don't add up to providing more funds to Catalonia without taking them away from the rest of the autonomous communities or the state.

The proposal by Pedro Sánchez's government to fulfill its commitment to the separatists by granting "unique" funding to the Catalan government is the political equivalent of squaring the circle. The Ministry of Finance, led by María Jesús Montero, argues that structurally granting more resources to Salvador Illa's administration will not harm the other regions currently part of the common system, nor will it damage the public coffers.

However, analysts and economists are on the opposite side of the diagnosis, warning that granting a quota to Catalonia would drain the central government of up to 1.5% of GDP per year, about €24 billion. Will the state cut its spending to the same extent? Or will it escalate its already record-high recourse to public debt to cover Sánchez's payments to the separatists? And how will it compensate the rest of the regions to maintain the principle of equality between territories when it comes to financing their public services?

As if that weren't enough, technical difficulties could hamper the rollout of the new financing system for the Catalan government. Tax inspectors warn that separating the collection and oversight tasks carried out in Catalonia from the state treasury will impact the fight against tax fraud and could generate conflict among officials affected by the transfer of powers to the new Catalan Tax Agency. In addition, doubts arise regarding the impact of the one-off financing on deficit and public debt control.

The Catalan Generalitat is currently the regional government with the largest volume of debt with the state through the Regional Liquidity Fund due to poor budget management and the constant claim of a lack of resources, despite the fact that various independent reports have indicated that Catalonia is one of the regions that benefits most from the current regional financing model.

Nor does the political fit of the fiscal pact seem straightforward, despite the proposal to extend it to the rest of the regions that request it, given the unanimous rejection by the rest of the regional governments (including those led by the PSOE, such as Asturias and Castilla-La Mancha), by some minority parliamentary groups, and by Junts, which opposes the quota agreed by the PSOE and PSC with ERC, considering it insufficient.