Public accounts

The Generalitat is already looking for alternatives in the FLA

The Catalan government reduces Catalan debt to below 30% of GDP for the first time since 2007.

Councilor Alícia Romero at the last control session.
28/03/2025
3 min

BarcelonaThe Catalan government is seeking private financing alternatives and reducing its dependence on the regional liquidity fund (FLA) offered by the state, Economy Minister Alícia Romero explained this Friday. The Catalan government hopes to be able to issue debt to the markets soon, as well as refinance part of its debt directly with banks in order to lower the interest it currently pays.

"The interest rates on the FLA are higher than in the private market," Romero stated during the presentation of the 2024 budget settlement. For this reason, the Department of Economy has been in contact with banks to refinance the first part of the existing debt (a common operation in public administrations) and, possibly, "We believe it would be positive because it would not have to pay such high interest rates," the minister stated. In 2024, the government requested around €8 billion from the FLA.

The FLA is a fund managed by the Spanish government that lends money to regional governments that have no other financing alternative, as they do not have a credit rating good enough to issue bonds on the debt markets. By law, the State is required to charge the regional governments slightly higher interest than the State would pay if it issued that debt on the markets.

For years, when the European Central Bank kept base interest rates at 0%, FLA interest rates were very low. But with the end of the pandemic and the inflationary crisis resulting from the Russian invasion of Ukraine, the European monetary institution raised the cost of credit to 4%.

This rise in interest rates in the eurozone translated into a general increase in the cost of credit, also for public administrations, such that the annual cost for the autonomous communities of borrowing money from the FLA reached over 3.4% in 2023. This has multiplied the financial expenses of the Generalitat, at a lower cost. In fact, without counting debt interest and other financial expenses, the Generalitat obtained a current surplus of 338 million euros last year, the first time since 2007, before the financial crisis.

Historically, the Generalitat is one of the autonomous regions that least meets the debt and deficit targets, regardless of the affiliation of the Government. In 2024, As reported by the Ministry of Finance on Thursday And the Generalitat confirmed this Friday that the Catalan government closed with a deficit (the difference between expenditure and income) of 0.41% of the gross domestic product (GDP, the indicator that measures the size of an economy), above the 0% (equal income and expenditure) that the Treasury had set as a target for all communities.

This represents a deficit of 1.227 billion euros in the 2024 financial year, well below the 3.875 billion (1.4% of GDP) recorded in 2023. "It is true that we have not complied [with the 0% target]", but "we have greatly reduced it. Romero did not want to go into the complaints of his predecessor at the head of the Economy, Natàlia Mas, that the Spanish government does not leave enough deficit margin in the communities and keeps most of the deficit margin authorized by Brussels for itself, and has indicated that the Generalitat will continue trying to liquidate the budgets " "not just for the ministry to say so".

At the moment, Romero has no evidence that the Treasury is planning to open a rebalancing plan – as required by European regulations – in the Generalitat, a possibility that yesterday the Minister of Finance, María Jesús Montero, left open for the autonomous communities that have not reached the 0% target.

More income and expenses

Thanks to the "good performance of the economy," Romero expressed confidence that tax collection will continue to increase in 2025. In 2024, the Generalitat (Catalan government) already increased its revenue by 14.6% (around €5.15 billion more) compared to the previous year, reaching €40.513 billion. The vast majority of this additional revenue came from transfers from the regional financing system, which gives the regions their fair share of personal income tax and VAT, although ceded and own taxes (the largest being inheritance, wealth and property transfers, and legal acts) also contributed a significant increase, an extra €554 million.

Spending was also a record level, growing €3.311 billion compared to 2023 (8.8%) and reaching €41.111 billion. Romero celebrated the fact that 97% of this spending was executed during the year and was not delayed. Likewise, the Government has reduced the payment period to suppliers from 38 days to 26 days between August 2024 and February of this year.

This positive evolution of economic activity in recent years, and also in 2024, has meant that, despite having a deficit and therefore increasing the debt of the Generalitat, the ratio of this debt to GDP has decreased, since the economy has grown faster than the debt (1.4.4%). Thus, in 2024 the debt of the Catalan government fell to 29.8% of GDP, the first time it has fallen below 30% in more than a decade, a figure that the Department of Economy estimates will be reduced to 24% of GDP with the final approval of the forgiveness of part of the FLA's regional debt scheduled for the second half of that year.

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