CaixaBank, Sabadell, and BBVA are among the banks refinancing 3.5 billion of the FLA in the Generalitat.

BarcelonaObjective achieved. The Generalitat (Catalan government) has "successfully completed" the partial refinancing process of the regional liquidity fund (FLA) for 2023 at a lower interest rate than the current one, amounting to €3.5 billion. As a result of this operation, the Catalan government will save €127.6 million in interest over eleven years, until 2035, according to calculations by the Ministry of Economy. This is the first operation with the private financial sector to finance long-term debt since 2012. CaixaBank and Banco Sabadell are two of the six entities with which the government has closed the agreement, according to financial sources. BBVA has also signed a €1 billion loan, according to the sources consulted.

After announcing its intention to turn to the financial sector to reduce the cost of its liabilities, between May and July, it received offers from financial institutions for amounts higher than the one requested. After analyzing the offers, it has formalized a total of seven loans with six Spanish entities, which have served to refinance up to €3.5 billion of the 2023 FLA.

Last May, the Council of Ministers and the Executive Council authorized the Generalitat (Catalan Government) to formalize long-term borrowing operations. The formalization of these new operations allows, on the one hand, to diversify the Generalitat's sources of financing and, on the other, to take advantage of the drop in interest rates compared to the 2023 peaks and thus obtain financial savings. It had been thirteen years since the Generalitat turned to the private sector for long-term loans, when the markets were closed by the autonomous regions and instruments were created to facilitate its liquidity and payment to suppliers.

The average interest rate on new loans issued is 2.951%, representing a 54.6 basis point reduction in borrowing costs compared to the 2023 FLA loan, which was 3.497%. The lower interest rate will translate into financial savings in interest of €127.6 million (€115.9 million) over the coming years.

Creditor State

The savings vary depending on the year. This year they will be €3.4 million, the following three years €19.1 million each, followed by €16.7 million in 2029, €14.3 million in 2030, €11.9 million in 2031, €9.6 million in 2032, €7.2 million in 2033, €4.8 million in 2034, and €2.3 million in 2034. As of December, the Generalitat's total debt was €89.7 billion, of which 87.5% is owed to the State.

The regulations allow the autonomous communities adhering to the FLA to borrow outside of this mechanism, provided that it is for refinancing purposes (i.e., no new liabilities are generated) and this serves to reduce the cost of debt, as is the case here.

The Ministry of Economy, headed by Alícia Romero, defended resorting to refinancing through private banks because the current context of lower interest rates and "the good financial health of the Generalitat" allowed them to once again seek credit from the private sector and obtain better conditions.

The debt crisis in Europe caused markets to close to the autonomous communities seeking financing. In this context, various instruments were created through which the State provided territorial liquidity, which culminated in the FLA. This year, the Generalitat (Catalan Government) requested €8.481 billion from the FLA, of which €8.048 billion is to cover debt maturities, €308 billion to meet the deficit target of 0.1% of gross domestic product (GDP), and €125 billion for other purposes.

The partial forgiveness of the FLA is expected to be approved by next week's Council of Ministers, which in the case of Catalonia amounts to €17.104 billion. This figure corresponds to 19.9% of the total debt owed by the Catalan government to the Spanish government. For all regions, it amounts to €83.2 billion. In any case, the measure, which is part of the conditions agreed upon with ERC for Pedro Sánchez's investiture, must be ratified by Congress, where it is, in principle, opposed by at least the PP and Vox.