The President of the Independent Authority for Fiscal Responsibility (AIReF), Inés Olóndriz, today took part in the meeting of the Fiscal and Financial Policy Council (CPFF) as an ex officio member entitled to speak but not vote, as provided for in the law establishing the institution.
The President began by setting out the limits of AIReF’s role as a guarantor of sustainability. She recalled that “it is not for this institution to take a position on the allocation of resources among levels of government or on the specific configuration of the regional financing system”, as these are political decisions for the Government, the Autonomous Regions and, ultimately, the legislature. “AIReF’s role is to analyse the fiscal implications of the reform and assess whether its design and implementation are compatible with the sustainability of public finances and with national and European fiscal commitments.”
As AIReF has repeatedly stated, “this assessment must take an overall perspective. In a country as decentralised as Spain, decisions on the resources of one subsector are not neutral for the others” and “affect the ability of General Government as a whole to meet its own obligations”.
For AIReF, “this comprehensive view is particularly necessary in the current context”, as public debt remains close to 100% of GDP, limiting the room for manoeuvre in the face of future shocks. In addition, “General Government faces growing medium- and long-term spending pressures arising from population ageing, adaptation to climate change, higher defence spending and a geopolitical environment that requires a greater capacity to respond. These pressures are distributed across subsectors with different powers and responsibilities.”
AIReF therefore considers that “the fiscal space available to each level of government cannot be analysed in isolation. If one subsector permanently increases its spending capacity, it is necessary to assess how that decision affects the space available to the others and the ability of General Government as a whole to comply with the aggregate fiscal path. The reform of the regional financing system must therefore be addressed comprehensively and in coordination with the other components of the financial and fiscal framework. It should also help move towards a more conventional relationship between fiscal responsibility, access to financing and market discipline, with well-aligned fiscal incentives.”
From this perspective, AIReF has consistently argued for a medium-term fiscal strategy built around four elements:
- Move towards “greater consistency between the national and European fiscal frameworks, reducing inconsistencies between them and ensuring fiscal planning that is compatible with Spain’s commitments”.
- “Strengthen corrective mechanisms and incentives for compliance. Both Central Government and the Autonomous Regions are at risk of non-compliance with the expenditure rule this year and in subsequent years, according to AIReF’s forecasts.”
- “Make extraordinary financing mechanisms genuinely exceptional, reserving them as a last resort subject to fiscal conditionality that strengthens incentives for compliance”, a position already set out by AIReF following the February 2025 CPFF meeting.
- “Strengthen coordination among levels of government. The challenges facing public finances and the high degree of decentralisation require effective mechanisms to coordinate decisions across the different levels of government and safeguard overall sustainability.”
As regards the agreement submitted to the CPFF for consideration, “it is not yet possible to make a definitive assessment of its effects on sustainability, because two particularly important elements still need to be specified.”
First, the agreement provides for the temporary adjustment to the timing of the receipt of 2027 resources, so that the percentage applied to payments on account may be up to three percentage points below 95%. “AIReF considers that it will be necessary to quantify the impact on the effective financing received by the Autonomous Regions in the first year of application and specify how the subsequent adjustment will be made.”
Second, the agreement “refers to future regulatory developments under which the additional spending by the Autonomous Regions financed with the new permanent resources would be excluded for the purposes of the national expenditure rule. Nor does it make any reference to the impact on other subsectors. If the new regional financing system increases the spending capacity of the Autonomous Regions, the spending capacity of Central Government must be reduced by the same amount. Otherwise, there would be a net increase in eligible expenditure, which would affect sustainability.” It should also be borne in mind that the fiscal position of the Autonomous Regions varies significantly in terms of both deficit and debt.
AIReF considers that “the scope of this regulatory change will need to be specified and, above all, its consistency with the European net primary expenditure path and with the aggregate commitments under the Medium-Term Plan (MTP) must be ensured. AIReF will be able to complete its assessment of the fiscal implications of the reform and assess whether its design and implementation are compatible with sustainability as its legal framework takes shape.”
In any event, “the proposed reform should be coordinated with the other components of the fiscal and financial framework. A new system that is not accompanied by reform of the national fiscal framework and a medium-term fiscal strategy could undermine the sustainability of General Government as a whole. This coordination should also provide the basis for setting out a genuine and credible fiscal strategy in the next MTP that seeks to quantify the fiscal pressures facing the different levels of government and ensures overall sustainability.”