Regional government debt: Recent trends and outlook
Fecha: marzo 2023
Santiago Lago Peñas
SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 2 (March 2023)
Following nearly two decades of legislative action, Spain’s fiscal rule framework is among the most advanced and rigid within Europe, systematically placing the country among the top quartile of the EU-27 in terms of fiscal governance. Nevertheless, data on regional governments’ deficit and indebtedness reveal a significantly weaker commitment to budget stability. Strong regional debt growth has largely been underpinned by collapsing revenues and high, rigid public spending in key public services, such as healthcare and education. Yet, debt levels differ significantly across regions, with just two regions, Catalonia and Valencia, accounting for 44.1% of the growth in regional debt stock between 2007 and 2022. Beyond the debate about exit strategies for the extraordinary financing mechanisms implemented since 2012, it is important to think about adapting the current fiscal stability framework to layer in the requirements that will come into force under the new European rules and the need to address identified shortcomings.