Zaragoza.- The Council of Ministers approved in the first round the Preliminary Draft Law on Exceptional Financial Sustainability Measures for the Autonomous Communities of the Common System. This regulation will allow the State to assume 83.252 billion euros of debt of the Autonomous Communities, which will benefit all the territories by reducing their liabilities, will free up some 6.7 billion euros of interest payments that can be used to strengthen the Welfare State and will allow them to gain financial autonomy by facilitating their exit to the markets.

In the case of Aragon, the cancellation of the debt by the State reaches 2,124 million euros. This means reducing Aragon’s debt by 23% compared to the close recorded in 2023.

The objective of this “unprecedented” and “exceptional” measure, as pointed out by the Deputy Prime Minister and Minister of Finance, María Jesús Montero, is to correct the over-indebtedness to which the Autonomous Communities were forced during the financial crisis due to the lack of resources by the Government of Mariano Rajoy. This contrasts with the financial support provided by the progressive government, which means that the Autonomous Communities have received 300 billion euros more resources in seven years of government of Pedro Sánchez compared to the seven years of conservative government.

Montero, during his speech at the press conference of the Council of Ministers, recalled that this rule, which benefits all the Communities, whether or not they have debt to the FLA, is “fully consistent” with the policy of financial support to the Autonomous Communities that the Government has applied since 2018.

In this regard, the Minister of Finance recalled other unprecedented measures implemented by the Executive in favor of territorial administrations such as, for example, the 30 billion COVID funds, which the CCAA did not have to repay unlike the FLA loans adopted by the PP Government in the previous crisis and which are the source of the over-indebtedness that the Bill seeks to correct.

Or also the maintenance of deliveries on account of 2020 as if there had been no pandemic, which generated negative settlements of 4,000 million that the State assumed and prevented the Autonomous Communities from having to return.

This policy of support for the CCAA is what has allowed the community of Aragón to receive 9,204 million more resources in the seven years of Pedro Sánchez’s government, excluding European funds, than in the seven years of Mariano Rajoy. In fact, among the measures adopted are the 832.5 million COVID funds transferred by the State to Aragon, or the 275 million negative liquidations of 2020 of Aragon that the State assumed, among other actions.

Methodology for the condonation

The Preliminary Draft Law includes the methodology for the calculation of the figure of forgiveness that corresponds to each community and that the Ministry of Finance already transferred to the autonomous governments last February. In addition, this proposal was approved at the meeting of the Fiscal and Financial Policy Council of the same month.

Subsequently, the Ministry of Finance has held individual technical meetings with almost all Autonomous Communities, including Aragon, to provide them with the most detailed information.

The methodology responds to objective, transparent, technical and equal criteria for all communities. Specifically, it consists of three phases.

- Phase 1. The growth of the autonomous debt during the financial crisis, that is, between December 31, 2009 and December 31, 2013, is compared with the growth of the autonomous liabilities during the period of the pandemic and the greater impact of the war in Ukraine, that is, from December 31, 2019 to December 31, 2023. In the first period, the debt increased by 109,582 million and, in the second, by only 29,272 million. This calculation shows a figure of 80,310 million, an amount that reflects the over-indebtedness that the communities recorded due to the absence of support mechanisms from the Central Administration in the financial crisis.

Once the over-indebtedness is identified, a technical criterion is used to determine the distribution. The bulk of the distribution of the condonation is done through the adjusted population criterion. In fact, 75% of the detected over-indebtedness of 80,310 million is realized based on the weight of the adjusted population average of each community between 2010 and 2022. For Aragón this distribution reaches 1,931 million euros of cancellation, which is 21% of its debt, compared to the average of 19.3% of the CCAA as a whole.

- Phase 2. The objective is that no Autonomous Community should be below the average of condonation per adjusted population. Therefore, the cancellation of those communities is raised below the average to ensure that they have at least 19.3% debt cancellation. Aragon is not affected at this stage because it is above the average.

- Phase 3. Two additional adjustments are made. In the first, the autonomous community is identified that with the methodology followed so far presents a greater condonation per adjusted inhabitant, which is the Valencian Community with 2,284 euros. And then, an additional cancellation is fixed until reaching that same level for the autonomous communities that have had during the period 2010-2022 a homogeneous financing per adjusted inhabitant lower than the average.

In addition, additional compensation is also established for those communities that have exercised their regulatory competences in the IRPF upwards.

In the case of Aragon, this third phase involves adding 193 million more condonation.

The adjustments of these phases are aimed at trying to compensate and equalize the communities in two ratios that are likely to generate comparisons, such as that of cancelled debt over total and cancelled debt per inhabitant. Once these corrections have been made, the total amount of the cancellation for Aragon stands at 2,124 million euros.

Debt Assumption Procedure

The Preliminary Draft Law also includes the procedure for the State to assume this regional debt. This process, which is voluntary, will depend on whether it is a community with or without FLA debt.

In the case of Communities with FLA debt, such as Aragón, the assumption of the debt will be applied through the cancellation or amortization of the living balances of the loans with the FLA, until reaching the amount foreseen in the law for each Community, starting with the oldest, until amortizing, if necessary, the corresponding one for 2019. From there, if necessary to reach the total figure to be condoned, the FLA loan of the year 2024 will be canceled and then those of the years before it will be canceled. That is, 2023, 2022, etc.

Compatible with the reform of the financing system

Vice-President Montero has stressed that the assumption of the autonomous debt “does not stop or replace the reform of the financing system” in which the Government will continue to work on a proposal that benefits all territories.

Likewise, the head of the Treasury has stressed that the assumption of the regional debt “does not stop or replace the reform of the financing system” in which the Government will continue to work on a proposal that benefits all the territories.

Finally, Montero has reiterated that the cancellation of the debt benefits all the Autonomous Communities, including those governed by the PP. “ Of the 83,252 million euros of debt assumed by the State, almost 60 billion correspond to debt of communities governed by the PP. In other words, 7 out of every 10 euros condoned benefit the communities where the PP governs,” said the head of the Treasury, who has asked the autonomous presidents of the PP to “rethink” and support a measure that is beneficial to citizens.