Catalonia's fiscal deficit remains above 21 billion euros

BarcelonaCatalonia contributed €77.742 billion to the state coffers in 2022 (19.3% of the total for all autonomous communities) and received €56.650 billion (14% of the total). This means that Catalonia's fiscal deficit was €21.092 billion. These figures come from the latest fiscal balances calculated by the Generalitat (Catalan government), which ARA has accessed, and which will be made public this Friday as soon as the government approves the draft budget for 2026. Catalonia's fiscal deficit stood at 8.2% of GDP, roughly in line with the average since 1986 (8.1%). Each Catalan, therefore, contributed €2,670 more than they received.

The 2022 results are similar. to whom the previous Minister of Economy, Natàlia Mas, presented While this breaks with the upward trend that had been in place since 2012, in 2021 the Catalan fiscal deficit soared to €22.013 billion (9.6% of GDP), a figure that marked a historical record. Does this mean that the Generalitat's situation has improved? Not entirely. The structural deficit is entrenched, and the Catalan government has no more room for maneuver with the current financing model. Sources from the Department of Economy consulted by ARA indicate that the decrease is mainly explained by a certain recovery in social security balances after the COVID-19 pandemic. In 2021, the social security deficit in Catalonia—which is managed by the State—exceeded €8.2 billion—heavily influenced by the EREs (Employment Regulation Files) and post-pandemic aid—while in 2022 it stood at €5.7 billion. Even so, the social security deficit shows a worrying trend, suggesting that it will once again negatively impact Catalonia's fiscal balances: while it stood at €3.5 billion in 2019, three years later, once the pandemic was over, it had already reached €5.7 billion.

Catalonia's fiscal deficit with the central public sector

"Catalonia contributes to revenue at a rate higher than its share of the national GDP [in 2022 it represented 18.8% of GDP and contributed 19.3%]; however, it receives a share of spending that falls below its population share of the national total [in 2022 it had 16.4% of the population and received 14% of spending]," as reflected in the budget annex. Since 2012, the law has required Catalan governments to submit the latest available fiscal balances along with their budgets.

Calculation methodsAs usual, the Catalan government will present the budget figures using two different calculation methods. The deficit of €21.092 billion corresponds to the cash flow method, which has traditionally been the one most favored by the Generalitat (Catalan government). This method calculates central government spending based on territory. The other method is the burden-benefit method, which also includes state spending on services for all citizens regardless of where they live: for example, spending on security and defense, the cost of the Congress and Senate, and European policies. Using the burden-benefit method, Catalonia had a fiscal deficit of €14.665 billion in 2022 (5.7% of GDP). A year earlier, the deficit had been €15.778 billion (6.9% of GDP). Executive sources emphasize, therefore, that the fiscal deficit lies between the 14.665 billion and the 21.092 billion indicated by the two methods.

Fiscal balance of CataloniaThe calculations made by the Catalan government are based on data published by the Ministry of Finance, but not all the necessary data is always available. This is a structural deficiency that all Catalan governments have faced, and which they attempted to resolve by forcing the Spanish government to publish its own territorialized fiscal balances. The government of Pedro Sánchez has not yet done so, despite having committed to it: for the time being, negotiates with Junts the method that should be used to calculateAnother characteristic of the Catalan calculations is that they neutralize the effect of the central government's deficit; that is, they assume that the central administration is in balance. Government sources acknowledge that, if this deficit were attributed to the central government, approximately €6 billion more would have to be added to state spending, and therefore the fiscal balances would be affected: using the burden-benefit method, the Catalan fiscal deficit would be around €8 billion, and using the monetary flow method, around €15 billion. New financing modelSince 2002, the average annual Catalan fiscal deficit has been 8.4% of GDP (monetary flow), a figure that successive Catalan governments have considered excessive. The way to counteract this structural situation is to change the rules of the game. The current financing model has proven insufficient, and the independence project did not achieve its objectives. At least two proposals are now on the table. Reviving the idea that Artur Mas put forward in 2012, Junts is demanding a Basque-style economic agreement, which, for the moment, has met with outright rejection from both the Spanish government and the other national parties.

The other proposal is the one presented in early January by the Minister of Finance, María Jesús Montero, with the support of ERC. According to ministry data, Catalonia would receive an additional 4.686 billion euros in 2027 And, at least for that year, its ordinality would be guaranteed (it would be the third to contribute and the third to receive). The processing of the new financing model is expected to be revived starting in March, even though there is currently no majority in Congress to support this proposal.