Catalonia receives a third of all state money so that the autonomous regions can pay their bills.

BarcelonaNearly 3 out of every 10 euros that the State has allocated to the autonomous regions since 2012 through mechanisms such as the regional liquidity fund (FLA) have gone to Catalonia. According to data from the Ministry of Finance, since that year to date, 145.365 billion euros have reached Catalonia through various extraordinary instruments, out of a total of 431.289 billion euros allocated to the territories under the common regime, which cover the deficit and pay bills and ten.

The Generalitat has received 4.494 billion of the 8.488 billion it requested from the FLA by May of this year, and has access to an additional 50 million from a loan from the European Investment Bank (EIB) for a total amount of 430 million, which is collected in tranches and must be approved. And it has already been approved to receive €3.235 billion in the third quarter.

Regarding liquidity instruments since 2012, things change if the calculation of the resources received is per inhabitant. In this case, the first is the Valencian Community, with €19,555 per person, according to demographic data from the National Statistics Institute (INE) as of April 1. The second is Catalonia, with €17,892.5 per inhabitant; and the third is Castilla-La Mancha, with €14,236.1 per person.

In absolute terms, the second autonomous community that has received the most extraordinary liquidity funds during this period has been the Valencian Community, with €106,273 million, 24.6% of the total; and the third, Andalusia, with €53,776 million, 12.5% of the total. One of the elements to improve this situation would be a new financing model, since the one currently in use has been outdated since 2014. Catalonia is defending its own model, which includes collecting all taxes, such as personal income tax and VAT, transferring the costs of centralized services such as defense and embassies to the State, and allocating a percentage to charitable projects.

These modalities, created to alleviate the impossibility of regional governments accessing markets when the debt crisis erupted in 2012, first under the PP government and then under the PSOE government, have meant that the main financier and creditor of the most indebted regional governments is the State. This is the case of the Generalitat (Catalan government), with a debt of €89.035 billion as of December 31, 2024. And 88 out of every €100 of this liability has the State as its creditor (€78.473 billion).

A few days ago, the Catalan government decided to solicit offers from banks to refinance €3.5 billion of debt, believing they could obtain it at a lower interest rate than with the FLA. This is the first time in thirteen years that the Catalan government has turned to the private sector for financing, taking advantage of the drop in interest rates. It estimates it could save around €24 million in financing costs.

In 2023, the average cost of funds obtained through the FLA was 3.497%, and last year it had already dropped to 3.159%. The Department of Economy states that, currently, the Spanish Treasury's interest rate differential with the FLA ranges between 60 and 75 basis points. In any case, the government has not yet set a date for beginning to finance itself through the markets, as it did before 2012, when it even resorted to so-called patriotic bonds, i.e., debt sold to individuals.

When the autonomous regions found themselves unable to obtain financing in the markets in 2012, various extraordinary mechanisms were created to provide liquidity to the territories so they could pay suppliers and their bills. First, supplier payment plans were created, followed by the FLA, intended for territories that did not meet the deficit and debt criteria; and the financial facility, created later and intended for those autonomous regions that did meet the targets.

The proportion of these types of funds allocated to Catalonia has remained almost the same since the creation of the various instruments for bill payment, debt maturities, or deficit coverage. In addition to the FLA and the financial facility, there is the REACT-EU liquidity fund, which provides loans to advance the resources that will allow the REACT-EU Initiative projects and actions to be carried out, before receiving resources from the European Union.

The amounts allocated to facilitate liquidity do not include the COVID fund, which was created to alleviate the effects of the health crisis caused by the pandemic, of which Catalonia received €3.29 billion. They also do not include the amount received from the distribution of the extraordinary fund of more than €13 billion for the autonomous regions, which was included in the 2021 State budget.

The main item of financing needs is always that allocated to cover debt maturities. This also applies in 2025, with €8.048 billion of the €8.488 billion planned, and of those received so far: €4.494 billion. During the first part of the current year, the Valencian Community has received the most resources, with €6.1376 billion, and will receive €2.235 billion more in the third quarter. Catalonia usually ranks first, with the exception of this year.

Patriotic Bonds

The Catalan government hopes to be able to access the markets in the future, although it hasn't set a date. Through the extraordinary mechanisms intended for the autonomous regions, the Treasury liquidated the last of the Generalitat bond issues intended for individuals and companies in 2014. The total amount of bonds was 781.5 million euros for two years at 5%, with quarterly settlement of interest accrued by 32,605 investors. This redemption marked the end of the financing cycle through the so-called patriotic bonds, which the tripartite coalition began in 2010.

The former CiU had previously used this system: from 2011 until the markets closed. The issues, which paid very high interest rates of up to more than 5%, had to be repaid through the FLA. From 2010 to May 2012, when the last issue was made, the total amount raised by the Generalitat through bonds for individuals and companies reached 12,726.5 million.

This type of placement was first launched in the 1980s by Jordi Pujol's government. The first was in 1981, for approximately 60 million pesetas (10 billion pesetas at the time) over four years at 11.75%. The next were in 1983 for 10 billion pesetas over four years at 14%; in 1985, for 4,242 million pesetas (25.5 million euros) over one year at 11.75%; and in 1986, for 20.4 million euros at 9.50% semiannually.