The price of not having a budget: the government would have to give up 1.5 billion euros

BarcelonaPolitical disagreement could lead to another budget extension in 2026. Such a decision always comes at a price: the government's planned spending increase, should the draft budget be approved, would rise by €9.1 billion compared to the 2023 budget, the last one approved to date. This figure was provided by the Minister of Economy, Alícia Romero, in an interview with the Catalan News Agency (ACN). But how many of these millions would be lost if there is no budget? Sources within the Department of Economy, consulted by the Ara newspaper (ARA), emphasize that at least €1.5 billion is at risk. These are funds earmarked for new projects, not included in previous budgets, and which, therefore, would be excluded from the budget extension according to the law.

There would be other fully guaranteed funds, those that fall under earmarked expenditures, meaning projects already committed that can only be allocated to specific actions. This item represents approximately 1.7 billion euros, although the Generalitat would receive them progressively throughout the year depending on when the projects need to be carried out. The current deficit target that the autonomous communities must meet is set at 0.1% of GDP, and therefore, the Generalitat could also use around 300 million euros even without a new budget. And there is yet another unavoidable item within these 9.1 billion euros that the councilor mentioned: debt interest payments, specially protected by the Constitution, which this year amount to 1.6 billion euros, 850 million more than in the 2023 budget. So, 2.85 billion euros would be guaranteed. What about the rest?

Beyond the €1.5 billion that are irrecoverable—the Generalitat (Catalan government) couldn't spend them, even if it had them, because a healthy economy requires a significant increase in tax revenue and state transfers—there is a substantial amount subject to budget negotiations. According to sources at the Ministry of Economy, there are €4.7 billion that could only be salvaged if new supplementary appropriations are approved by the Catalan Parliament. These are funds associated with the Generalitat's recurring expenses, such as planned investments and salary increases for civil servants, among others. The problem with this approach, which governments of all political stripes have had to resort to since 2012, is that modifying or increasing expenditures requires parliamentary approval, which slows down government action. Last year, more than 2,300 such cases were processed due to the extended budget. This figure practically doubles the 1,200 carried out, for example, in 2019, another year with extended accounts.

An unavoidable negotiation

With the additional €9.1 billion in spending, the Catalan government's total budget for 2026 will be around €50 billion. Other key figures to be detailed in the draft budget include the reduction of Catalonia's public debt as a percentage of GDP, which has fallen to approximately 27% – and will reach 22% with the FLA debt forgiveness – and the reduction in the average payment period to suppliers, which in 2025 was 28 days.

These figures will dominate some of the headlines starting Friday, when the president of the Catalan government, Salvador Illa, has pledged to approve the bill in the executive councilAlthough he doesn't have all the necessary support secured. He's missing the support of the party he was most certain would be on board, ERC. For now, From Calàbria Street in Barcelona, ​​they are preparing a comprehensive amendment.The budget, which was to be debated in the Catalan Parliament on March 11, has been rejected because they criticize the fact that their conditions have not been met. Esquerra Republicana (ERC) maintains that it will not negotiate the budget unless there are new gestures guaranteeing that the Socialists will honor their agreements, but, as they did last year, they have already opened the door to negotiating supplementary credits, which could save up to 4.7 billion euros. The Republicans have linked income tax revenue to the budget negotiations from the outset and believe they do not have sufficient guarantees from the Spanish government that the Catalan Tax Agency will ultimately collect 100% of the tax. Last Friday's meeting between the leader of the Republicans, Oriol Junqueras, and the Spanish Prime Minister, Pedro Sánchez, was decisive in Esquerra's decision. According to sources consulted by ARA, Esquerra had even scheduled budget meetings with the Illa government—which were to begin this Monday—but ultimately changed its mind.

Relations between Junqueras and Illa, which had been cordial until now, have been strained by recent events. Until a few days ago, both sides intended to hold swift negotiations—the relationship had been fluid since the beginning of the legislature, allowing them to reach agreements on numerous issues—that would result in a budget with guaranteed votes before it even began.

Although mistrust has taken hold in the party leadership since Friday, their strategies remain aligned. The PSC and the PSOE need the Republicans to pass budgets and ensure the stability of the governments. And Esquerra needs the Socialists so that crucial issues like the personal income tax reform and the new financing model can move forward.