"Do you want me to wrap myself in an estelada in Andalusia?": why has the new financing failed?

Barcelona / MadridWith twelve years of delay, in the month of January, the then Minister of Finance, María Jesús Montero, presented a new autonomous financing model. It was the first time that such progress had been made since the 2009 reform, also promoted by the PSOE, although that reform arrived with the consensus of all the communities governed by the socialists –those of the PP voted against it– and also with the specific endorsement of the tripartite that was then piloting the Generalitat. A very different situation from the current one, because Montero presented a reform that only Catalonia and the Canary Islands have endorsed and that has had to overcome an adverse electoral cycle for the Moncloa. "Do you want me to wrap myself in an estelada in Andalusia?", the former minister said to ERC, recalls a consulted source. The Andalusian elections in May –with Montero as the socialist candidate–, in fact, caused the calendar to be delayed. So much so, that it has not even reached the council of ministers table.

Neither the PP nor the two common regime communities governed by the socialists, Asturias and Castilla-La Mancha, endorsed it. With the early elections, the reform has become a dead letter. But, why has this attempt to reform a system that does not satisfy any community been so tortuous?

The pact for Catalonia to have a new financing system was born from the investiture of Salvador Illa. ERC requested a reform of the model in exchange for giving its votes so that the leader of the PSC, winner of the May 24 elections, would be president of the Generalitat. The PSOE made the pact its own. The negotiations between the Ministry of Finance of María Jesús Montero and ERC began in April 2025, but were stalled when the Cerdán case broke out and the PSOE was left in shock. To the point that the scenario of early elections loomed. At that moment, however, the negotiations were already not going well, because the PSOE was reluctant to materialize one of the points of the summer 2024 pact: the transfer of the management of the IRPF to Catalonia.

In fact, this issue stalled the talks for months until, during the autumn of 2025, both parties decided to split the negotiation: on one hand, the financing model, and on the other, the personal income tax (IRPF). All of this led to the January 2026 agreement to reform the model, although at that time the PSOE was already having trouble getting its barons to accept a model they considered only benefited Catalonia. However, the transfer of the IRPF remained. The PSOE stood firm against yielding this competence, and the ERC refused to approve the Generalitat's budget—Illa ended up withdrawing it in March after approving it in the executive council. After the clash, both parties decided to sit down again but left this matter on hold.

In the meantime, the Andalusian elections in June stalled the processing of the new model because María Jesús Montero did not want it to interfere with her campaign. The idea was for it to be discussed in a Fiscal and Financial Policy Council (CPFF) in July, but the PP pressured to change the date because they "wanted to study it," considering it a "preferential treatment" towards Catalonia. "We have never counted on them," state sources from the Treasury. "The sentiment that 'let Spain fall, we will lift it up ourselves' weighed more," point out sources from this department.

However, in Catalonia, the model did not have everyone's endorsement either. Junts considered it insufficient—they continued to defend the economic agreement—and, as of now, if the reform had reached Congress, Carles Puigdemont's party would still not have given its approval. In other words, if Sánchez had not called early elections, there was no guarantee it would have gone through. "Not everything has depended on us," defend Treasury sources.

The new financing system meant an increase in resources for all communities. For Catalonia, 4.686 billion euros annually. The Spanish government argued that everyone gained (or stayed the same) in absolute terms. For this reason, from the Ministry of Finance, there is a sense of "regret," acknowledge sources from this department, that this reform could not finally materialize. The model was approved in the September CPFF, but it never reached the Council of Ministers' table. "The whole process has been marked by a cycle of delays caused by electoral calls and not having the majorities," point out other consulted sources.

The 2021 precedent

The reform approved in September was not the first step the Spanish government took to renew the model. In fact, Montero always set it as a commitment, both during Pedro Sánchez's first term and during his second. The first major step in this direction was in December 2021. The former minister proposed changing the adjusted population calculation –which levels out financing resources by following criteria such as population, spending on healthcare or education, for example, and serves to know how much each autonomous community receives–. The negotiation of the model agreed upon with ERC was also a stumbling block.

At that time, the Generalitat –governed by ERC and Junts and presided over by Pere Aragonès– agreed to discuss it, but with many nuances. The Minister of Economy, Jaume Giró (Junts), was in charge of making it clear that the concept of adjusted population did not please Catalonia, which responded with a proposal that demanded taking into account the real population and addressing the distribution of taxes. The rest of the communities also sent their proposals. Montero ended up throwing in the towel given the impossibility of reaching a common denominator, not only with Catalonia, but with the rest of the communities, including those of the PSOE. That was left in a drawer: the disagreements between Junts and ERC and the 2023 snap state elections influenced it.

With the agreement between ERC and the PSC, the former Minister of Finance saw herself pushed to roll up her sleeves. Sources from her circle believe that it was she who facilitated the work to move faster due to her decentralized vision of the State and being more “sensitive” to the territories and their demands. However, ERC considered that the former minister was dragging her feet when it came to getting down to work on the reform due to her candidacy in Andalusia, but also because "the priorities did not coincide," point out republican sources.

A card for the November 29th campaign?

Treasury sources say that the work has not been done “in vain”. The new model could serve the PSOE for the electoral campaign, especially in those places, such as the Valencian Community and Murcia, where underfunding stands out. From ERC they admit disappointment that the negotiations of the last months have not seen the light of day. And they want to exploit this issue in the campaign, but in their case to directly point to the socialists as the ones responsible for the reform having derailed.