Fiscal deficit and poor regional funding

What has happened to us in recent weeks, from the announcement of a new regional financing model to the commuter rail collapse that will last, at the very least, throughout this year? The short answer is: we have suffered from a large fiscal deficit and poor regional funding. We are paying more attention.

Despite the fact that, to the despair of those even remotely knowledgeable on the subject, the majority of the Catalan population surveyed by the CEO He believes the railway problems are the fault of the Generalitat. And not from the State (central administration, Renfe, and Adif), everything that has happened with the commuter rail network (and with the AVE high-speed rail) is a consequence of the underfunding of the State and its extensions (Renfe and Adif) and, therefore, is purely a fiscal deficit. It is an expense that the State should make because the powers are theirs, and the Generalitat (Catalan government) is not authorized to do so. When the expense is the responsibility of the Generalitat (as with Ferrocarrils de la Generalitat), the expense has been incurred, and the maintenance has been carried out as well.

Theoretically, the negative impact of all these events should motivate the PSOE (Spanish Socialist Workers' Party) and its allies, who depend heavily on votes in Catalonia, to make a greater effort in investments. At the very least, to make a greater effort in maintenance (including the scandalous copper thefts, which it now turns out are being carried out by personnel subcontracted by Renfe and Adif). The governments in Madrid have been depending on Catalan votes for years without this being reflected in many of their essential services.

The new regional financing model: to what extent can it reduce the fiscal deficit? Some authors have already explained it: the increase in state spending is paid for, in Catalonia, as a percentage corresponding to Catalonia's GDP as a percentage of the total national GDP (18.8% according to the latest data). But given that the increase in spending allocated to the Generalitat of Catalonia will be 22.3%, the portion of the fiscal deficit that will be reduced will be just over 700 million euros. A 4% reduction in the fiscal deficit. It's not zero, but it's not the 23% reduction that was announced. This can be slightly adjusted if the other administrations in Catalonia that receive state funds—municipalities and provincial councils—are taken into account.

In recent days, other weaknesses in the agreement signed between ERC and the Ministry of Finance have come to light. For example, the increase in resources is measured against the 2023 settlement, the latest available, while the new model will not come into effect until 2027. If we make some estimates of the increases that occurred in 2024 and 2025, and those that may occur in 2026 and 2027, just considering salary increases of 2.5% annually, and with a Generalitat budget approaching 40 billion euros, the increase in salary costs alone already consumes nearly 4 billion euros.

In the Junqueras-Montero presentation, everything was argued based on the adjusted population, which must have been the most elegant way the three parties (the Treasury, the Catalan government, and ERC) found to achieve their desired result. But let's not fool ourselves, the only way to calculate resources per capita has been and will be by counting the current population (which includes everyone entitled to public services, which for many services often includes the unregistered population, such as tourists). Everything else is a falsehood that may be convenient to accept, but it is self-deception.

The actual current population is the one that consumes, produces, and uses public services; that is, the one that should be counted. Do all these services cost the same in every autonomous community? The Renfe train drivers' strike has served as a stark reminder of the answer: no. Train drivers begin their careers in Catalonia when they have no other choice, because that's where the most vacancies are. But they say it with complete transparency: as soon as they can, they flee Catalonia because the cost of living is higher and because of the difficulty of driving in our region given the state of the rail network. Purchasing power varies considerably depending on the autonomous community. And their spending is primarily on hiring staff. There is more capacity to hire staff where the cost of living is lower, and less where it is higher. This is the only correction that should be made to the actual population figures. It should be actual population financed in real terms (that is, at purchasing power parity). Only this "detail" undermines the merits of the new funding model for Catalonia. If funding were based on actual population and purchasing power parity, there would no longer be any talk of ordinality: we would all be equal, in real terms. The settlement could be carried out on these terms: guaranteeing real per capita equality. Maximum transparency and maximum constitutionality.