Spain to forgive over €17bn of Catalan debt after ERC deal

Spain is to forgive €17.1 billion in debt owed by Catalonia, Esquerra Republicana (ERC) president Oriol Junqueras announced on Monday.

The deal between the pro-independence party and the Spanish government covers 19.9% of Catalonia’s total debt and 22% of its FLA (Regional Liquidity Fund) debt.

At a press conference at party headquarters, Junqueras emphasized that the figures went "beyond" the initial forecast (of €15 billion, 20% of FLA debt).

Spain's Council of Fiscal and Financial Policy will approve the cancellation of the debt on Wednesday. It will then need to be ratified by the Spanish congress.

Junqueras stressed that the agreement "doesn’t change anything" – Esquerra will not negotiate 2025 budgets with either the Catalan or Spanish governments, both of whom rely on ERC to pass legislation.

€2,300 per person

The agreement with the Spanish government announced by Junqueras on Monday is for the cancellation of 22% of the FLA debt.

The figure represents a total saving of €17.104 billion, roughly equivalent to nearly €2,300 per person, and a debt saving of between €250 million and €300 million for the Catalan government, Junqueras said.

Regarding its approval in congress, Junqueras said he was "not afraid of anything or anyone" and is confident that the chamber will endorse the pact concluded with Pedro Sánchez’s minority government.

The ERC leader said that he was "satisfied" with the agreement, but warned that his party always wants "more and more."

Budget talks for 2025 are a non-starter, Junqueras said, and current agreements must be fulfilled, not least a new unique financing model for Catalonia to give it more control over taxes.

Beyond Catalonia

The debt forgiveness measure will apply beyond Catalonia. 

The Spanish government announced on Monday that €83.25 billion of debt owed by regional administrations across Spain will be canceled. 

The executive will propose the measure to the Council of Fiscal and Financial Policy on Wednesday, the finance minister, First Vice President María Jesús Montero, announced at a press conference.

Writing off the debt is a "clearly positive and generous measure,"  Montero said.

The Socialist-led coalition's action "reinforces the welfare state," because it helps clean up the finances of the regions, improves their access to markets for financing, and allows them to allocate more money to education, healthcare, and social services, she added.

PP opposed

According to Montero, the debt forgiveness "fits perfectly" with the policy that Pedro Sánchez's government has been implementing since 2018, which has allocated €300 billion more to Autonomous Communities than the previous conservative People's Party (PP) government under Mariano Rajoy.

The vice president stated that the measure aims to "correct" the "over-indebtedness" assumed by regional administrations during the PP government's mandate.

Autonomous Communities governed by the PP have already agreed on a common position against the canceling of their debt.

Montero warned that it would be "very difficult" for citizens to understand a "no" from the PP to "a clearly positive and generous measure".

The minister recalled that the forgiveness is "voluntary," and therefore regions that do not want to take advantage of it do not have to do so.

Andalusia and Catalonia eliminate most debt

According to the figures made public by the Spanish treasury, Andalusia and Catalonia are the territories that see the most debt written off – €18.79 billion for Andalusia and €17.10 billion for Catalonia. Valencia will have €11.21 billion of debt canceled and Madrid, €8.64 billion.