María Jesús Montero's 'all in'

MadridMaría Jesús Montero, First Vice President and Minister of Finance, plans to make a all in The first quarter of 2026. Pedro Sánchez's second-in-command has been grappling with three issues for some time: the cancellation of regional debt, the special financing model, and finally, the national budget. If her calculations are correct, all three will be on the table between February and March. This would mean that these three thorny issues would coincide. Despite the high level of political—and media—expectation, she is not worried. "It has to be done," sources at the Ministry of Finance summarize.

"She's used to rubbing salt in the wound," reveals a former Catalan MP who had to negotiate on more than one occasion, adding that "because of the exasperation of those who have to talk, sometimes it's hard to get her back on track [when it's stuck] and to prevent her from taking things for granted."

The question is how she will play her cards when the time comes, but also whether she will be the one to determine the outcome, given that she is the PSOE candidate in Andalusia—although Juanma Moreno (PP) has not yet called elections, they should be held no later than June. "Someone else will do it [if she's not there]," say sources at the Treasury, downplaying the possibility that she might not be able to finish the work she started. Montero's idea, and that of the Prime Minister's office, is to remain in the ministry until the elections are called.

We're taking it one step at a time. The first measure, the regional debt forgiveness, will reach Congress in December, after being approved in a second round of voting at one of the upcoming cabinet meetings. Given that January is a recess month, the vote wouldn't take place until February. The Treasury is confident that the measure will pass with the votes of the investiture partners, including Junts, despite the recent split. In fact, the Spanish government has consistently criticized the PP for rejecting a proposal that, they argue, also benefits the regions they govern. Andalusia stands to benefit the most in absolute terms (it would have €18.791 billion forgiven), which could work in Montero's favor during the regional election campaign if Juanma Moreno definitively rejects the debt forgiveness.

The Treasury shares a reflection that sources from the Independent Authority for Fiscal Responsibility (AIReF) expressed a few days ago. they raised the issue at an information meeting"The measure represents an improvement for the financial situation of the regions. [...] I don't know what arguments can be given for not accepting debt forgiveness, especially for the autonomous communities with a high level of debt. The technical criteria are beyond us; they would be more political," sources from this organization indicated.

The challenges will come with the regional financing model, as has become clear in this week's Fiscal and Financial Policy Council meeting, where Montero herself announced that will present a proposal between February and March.

The challenge for Montero is finding a balance between ERC, with whom she is negotiating the system, and the demands of the other regions, most of which are governed by the PP, which, from the outset, opposes this bilateral agreement. In fact, some Republican voices in Madrid were worried that, given the elections in Andalusia, Montero wouldn't be able to present a proposal that respected the agreement they signed to invest Salvador Illa as president of the Generalitat. But the Spanish government needs this to happen for the stability of the head of the executive in the Principality. A key element will be whether ordinality is ultimately incorporated in some way. Now, sources at the Treasury see it as feasible. In any case, Montero will propose a model that will still take time to take the steps toward final approval.

An "open window" for budgets

The state budget is the major unresolved issue of this legislative term. The most recent budget, in fact, is the 2023 budget, which remains extended. However, it has been a long time coming, a situation explained by the balancing act required with the parties that supported the government's investiture, and particularly by the fluctuating relationship with Junts. While the lack of a budget has meant enduring attacks from the right, witnessing the defeat of the public accounts in Congress is not easy to swallow—as was the derailment of the deficit and debt targets, the necessary step before the budget was passed, last year. For this reason, Montero had stopped pushing so hard in that direction.

But this time, Pedro Sánchez's mandate is to present them. "She's a soldier. It doesn't matter if the context is more complicated," say sources at the Treasury. Montero's intention is for them to reach the Council of Ministers in February. After that, the process could be accelerated if she sees "an opening," such as the return of Carles Puigdemont.

Although this time the approval of the deficit and debt targets in Congress is not yet guaranteed, Montero is already laying the groundwork, and she's not straying far from debt forgiveness: these are the most expansionary budgets ever proposed, with a record spending ceiling of over €212 billion. "This is money that won't go to social services, or scholarships..." Montero warned this week from Moncloa Palace. "Some [parties] think they can defeat it without justifying why," she added. She made the same point on Monday, after the Fiscal and Financial Policy Council meeting: "The new financing model will mean more resources [money] for the autonomous communities." Montero will have to see if the promise of a windfall of millions is worth it. all in at that level.