Published on Monday, September 4, 2023

Spain | Debt relief already granted

The central government has subsidized the interest payable by the regional governments by guaranteeing them interest rates below what they would have paid had they borrowed on the market. The higher the debt incurred, the larger the transfer from central to regional government.

Key points

  • Key points:
  • The debt of the various autonomous communities of Spain has risen more slowly than would have been the case had it not been for the Autonomous Liquidity Fund (Fondo de Liquidez Autonómica, or FLA for short).
  • It has grown significantly, but unevenly. In the period following the global financial crisis, it increased from 5.8% of GDP to hit 25% of GDP in 2015.
  • Within these broad levels, indebtedness varies considerably by region: while the Government of the Valencian Community reported a debt of 44.4% of GDP in 2022, Madrid had a debt equivalent to 13.5%.
  • Therefore, reducing this debt will require a significant effort among all regional governments, though some will have to try harder.

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