The Government has activated the budget machine and intends to bring to Congress, by the end of the year, the stability path for the years 2026, 2027 and 2028. This roadmap marks the deficit objectives of the communities and municipalities and represents a decisive previous step for the preparation of public accounts, but for some time it has become a headache for the Executive: last year its path was rejected with the votes against of PP, Vox and Junts, and This year he doesn’t have everything in his favor to get the spot of the Cortes. If the parliamentary bloc were to materialize again, the Ministry of Finance has already warned that the extra spending cushion of 5,485 million offered to communities for the period would disappear, a map where Madrid and Catalonia would have to give up the largest sums: around 1,000 million each over three years.
These calculations were drawn up by the same ministry led by the first vice president, María Jesús Montero, in the midst of the struggle on the path to deficit with the opposition and the communities, the majority governed by the PP. The head of the Treasury proposed on Monday, at the Council on Fiscal and Financial Policy (CPFF), where he met with regional sector advisors, a deficit of 0.1% per year. That is, every year they could spend more than they earn, up to a maximum of one tenth of their GDP.
The target of 0.1% of GDP, in cash, would mean an additional cushion of 1,755 million for next year, 1,828 million in 2027 and 1,901 million in 2028 for all communities. In total, almost 5.5 billion more that regional governments could use to finance their own policies, especially health, education and dependency, pillars of the welfare state whose responsibility falls on the autonomies. And this very argument is the one used by Montero to defend his proposal and seek support from Congress, stating that rejecting this path would be like “throwing a stone at your own roof”.
If the proposal were not carried forward, the communities with the greatest negative impact would be Madrid and Catalonia, as they are the most economically vibrant territories, with the highest GDP in the country. The additional fiscal space they would gain with a 0.1% deficit target would amount to nearly $2.2 billion over three years between the two regions, a figure that represents nearly 40% of the total extra margin proposed by the Treasury. Both could spend another 350 million each year. By size of its activity, Andalusia is in third position: it would lose 234 million in 2026, 243 next year and 253 the following, for a total of 731 million over the life of the route.
With these numbers, the Treasury increases pressure on the PP, the main opposition party and formation that governs in 11 communities. He is also angry with Junts, who announced the break with the Executive and opposed the previous path, which also envisaged a deficit of 0.1% for the communities. But nothing guarantees that the comedy will be good.
Regional Treasury councilors have already voted against the budget path on Monday during the meeting of the CPFF, the body designated to discuss issues relating to regional accounts and where the ministry must, by law, report on regional deficit and debt targets for future years. Furthermore, many of them develop their budgets without considering the deviations between income and expenses. “It is Genoa that decides to reduce the spending capacity of the autonomous communities governed by the People’s Party,” Montero complained after the meeting.
The national leadership of the PP has in fact entered fully into the debate. It displeases La Moncloa that a larger deficit margin means more debt, a position shared by its regional barons, and which at the same time contradicts the proposal for regional debt relief that the Government agreed with the ERC and which it began to elaborate in Congress. However, they defend that the priority should be the reform of the regional financing system, a request supported by the leaders of the socialist communities and which the Treasury has promised to unblock.
Montero announced that between January and February of next year he will present a new financing model, which has been awaiting reform for more than a decade. Its goal is that the model can be closed during 2026 so that it can come into force at the end of the legislature.
Balance
The date to present the deficit path to Congress, however, is imminent: before December, so that the state’s general budget project can be ready at the beginning of next year and put an end to the current legislative paralysis. The Government has been unable to give the green light to new accounts since 2023, a consequence of the parliamentary fragmentation that crystallized after the last general elections.
Everything indicates that political instability will once again leave its mark on the processing of these accounts, but the Treasury has already announced that it has an ace up its sleeve. The law on budget stability requires Congress to vote on the deficit targets and, in case of rejection, the Government presents a new path within a month. However, it says nothing in case the vote fails twice in a row, nor does it expressly prevent the government from moving forward on budgeting if deficit targets do not receive parliamentary approval.
It is precisely this legal loophole that the Government is clinging to, also maintaining that there is a constitutional mandate that obliges the Executive to prepare the accounts and that the Basic Law guarantees the principle of budget stability. “In the event that this path is rejected, the one provided for by the Constitution, which establishes the budget balance for the autonomous communities, will come into force,” Montero repeatedly stated this week.
In reality, the Constitution refers to a principle of structural balance, a quantity different from the accounting deficit of the three-year process which is taken into account to evaluate any non-compliance. This indicator, which does not take economic cycles into account, is more difficult to calculate and could only be measured retrospectively. However, faced with an unprecedented scenario, the interpretation of the constitutional text presents itself as a resource to break the blockade.
