The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, today closed the 12th Conference on Regional Finances organised by the Network of Researchers in Regional Finance and Financial Decentralisation in Spain (RIFDE). During her speech, she reviewed the outlook and challenges facing the Autonomous Regions (ARs) in the current economic context, and called for predictability and shared responsibility so that the ARs and the other sub-sectors can perform adequate budgetary planning.
Cristina Herrero began her speech by highlighting the consensus that exists on the need to reform the bases of regional public finances: their financing system, extraordinary financing mechanisms and the fiscal governance framework, which are key to adequate budgetary planning. In her opinion, strengthening these bases requires shared responsibility and the participation of all the agents involved (sub-sectors, Parliament, the Fiscal and Financial Policy Council and AIReF).
Furthermore, it is necessary to know the state of Spain’s public finances and what the medium and long-term outlook is. In this regard, Cristina Herrero pointed out that the Spanish economy remains strong, with growth rates above 2% in 2025, but the medium and long-term outlook is more moderate. At the fiscal level, the medium-term outlook points to a public deficit below 3% of GDP, but with dynamic expenditure and a slowdown in debt reduction.
The President reviewed the specific situation of the sub-sector of the ARs, which will increase its deficit in 2025, but will correct it in the medium term, in line with the normalisation of the settlements of the Regional Financing System. The sub-sector’s revenue and expenditure will stabilise slightly above 15% of GDP, and debt will maintain a downward path, driven by a primary surplus, albeit still above the 13% of GDP threshold.
However, from an individualised perspective, the ARs continue and will continue to present very heterogeneous fiscal positions in terms of both deficit and debt. In fact, in the medium term AIReF expects the budgetary deficit problems to persist in those ARs in the worst debt situation. It also expects debt to continue to grow in the most indebted regions, such as Murcia and Valencia, while it is expected to fall in the rest.
Cristina Herrero recalled that AIReF sees a risk of non-compliance with the national and European expenditure rules in 2025 by the AR sub-sector.
She pointed out that in the last three years the ARs have taken permanent revenue measures with a negative collection impact of €2bn, as well as permanent expenditure measures that have led to an increase of €3bn, concentrated in personnel expenditure.
A shared responsibility
In her words, meeting the European fiscal commitments for 2025-2028 requires a comprehensive vision to guarantee debt sustainability, which requires predictability and responsibility to be able to carry out adequate planning for each tier of government. This will require a clear fiscal framework and sufficient information, as on numerous occasions the ARs have had to prepare their budgets without information on the fiscal rules to which they are subject or the instalment payments, for example. In her opinion, both the ARs and the rest of the sub-sectors should be involved in the reform of the national fiscal framework and in the definition of fiscal targets.
In this regard, she recalled that the reform of the national framework must go beyond the necessary transposition of the European directive, with the aim of providing a true medium-term vision, reviewing the multiplicity of current fiscal rules and focusing on growth and the quality of public finances, among other things. Moreover, in the short term, progress should be made as soon as possible on matters such as improving consistency between the national and European expenditure rules. For their part, the ARs also have a responsibility to contribute to compliance with the commitments by paying close attention to the evolution of expenditure and the possible fiscal risks that AIReF warned about in the Opinion published last March, which focused on the Central Government (CG) but with many conclusions that could be extended to the ARs.
Cristina Herrero recalled that AIReF, under this idea of shared responsibility, has made several recommendations to both the CG and the ARs to reform the fiscal framework and set targets, as well as to address expenditure to ensure compliance with national commitments and those acquired with the EU authorities.
