The autonomous communities will receive next year more money than ever from the system of regional funding. Managed 108.058 million euros, almost 25% more of resources in the worst of the crisis. Even so they will continue spending more than they earn. They are responsible for providing public services such as health, education and social services, chapters with a large amount of stress of spending by the aging of the population, technological developments and pharmaceutical, and subject to other demands for political reasons. The directors of Finance regional also have another major concern linked to the treasury: they must meet the maturities of the debt that already have formalized and enter into new loans to finance the deficits new.
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communities will need more than 27,000 million to be funded in 2019, Five communities raise its ratio of debt despite the improvement of the funding, Almost 80% of the debt of the Catalan is now in the hands of the State Board of andalusia wants to find 1,000 million in the market and leave behind the FLA experts urge the State to cut off the tap of liquidity to the communities The communities will join more money than ever because of funding
To cover these financing needs, the central State will activate the extra funding liquidity (the FLA and the Financial Facility) to provide to the communities 25.091 million euros. Among the most throw of these credits include Catalonia, which will receive 32%; Comunidad Valenciana will be 23%; and Andalusia (13%). In this latter case, it is an amount much lower than other years, because as Madrid, the Basque Country or the Balearic islands, have already returned to the markets or are on the verge of doing so.
Returning to the markets
These extraordinary mechanisms of funding were born in 2012, in the worst of the crisis, when the financial markets closed the doors to the autonomies. At that time, when the risk premium was fight that threatened to jump into the air the Spanish economy, investors distrusted the ability of communities to repay your debt. And the central State had to go out to rescue them.
The Executive of Rajoy devised the plan of payment to suppliers, a Treasury loan on advantageous terms to the regional administrations pay the bills that they had in the drawers. This mechanism was followed by the Liquidity facility Autonomous communities (FLA), an instrument similar to the previous but that also allowed them to cover the large deficits incurred and to pay the maturities of the debts that were already incurred. And in 2015 we launched the Fund Financial Facility (FFF), other types of loans even more advantageous to the regions more compliant with the deficit targets. Although these lines of loans were going to be temporary (in fact in his last official figure, the term extraordinary) have been in force since 2012.
In total, the Treasury has injected more communities of 262.000 million between the different mechanisms of extraordinary liquidity, the equivalent of 25% of the Spanish GDP, according to data from the Treasury. Although the autonomous communities have already returned about 88,000 million of these loans, as contained in the statistics of the Bank of Spain.
Finish with these credits
The main regulators and supervisors international (IMF and Bank of Spain, among others) have recommended the Government to put an end to these mechanisms because they generate a moral hazard [by the perverse incentives not to consolidate the accounts] and to submit to the discipline of the financial markets.
Both the Executive of Rajoy as the Sanchez’s have been delaying your closing because not all communities are prepared to face abruptly to the demands of the markets, banks and investors.
For this reason, the Delegate Commission for Economic Affairs of the Executive socialist approved last July a mechanism for the gradual departure to the markets of the autonomous communities. “The goal is that the autonomous communities are in a financial situation more sound to return to funding itself in the market,” noted Treasury. Since then, Andalusia, Madrid and the Basque Country have issued debt from private investors. And the Balearics already have the authorization to do so.
The Government of Sánchez has also devised another formula to relieve the tensions of the treasury. In July, approved a protocol to which the autonomous communities could refinance short-term debts, and pass them to the long-term. It was a measure that favored, above all in Catalonia and the Valencian Community, the more liquidity problems suffer. This pathway allows the autonomous communities to have financial credit, structural, and not cyclical [that allows them to deal with specific needs] can refinanciarlos long-term.
