Government activates the largest regional debt relief and places the Balearic Islands among the major beneficiaries

On Tuesday, the Government approved the preliminary draft organic law that sets in motion the largest partial cancellation of regional debt ever carried out, an operation by which the State will absorb 83,252 million euros, equivalent to a quarter of the indebtedness of the common system. The Balearic Islands is among the most favored communities, with an estimated saving of 1,741 million Euros, according to the spokeswoman of the Executive, Pilar Alegría. The plan will be sent to Congress before the end of the year for processing.

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Alegría underlined that the measure will allow the autonomous regions to free up to 6,700 million in interest, funds which the Executive plans to redirect towards health, education and dependence. In absolute terms, Catalonia and Andalusia will be the regions that concentrate the largest volume of cancellation, although the relative impact places the Balearic Islands in a prominent position within the new regional financial map. Despite the PP’s criticisms, the Government maintains that its communities will end up benefiting from the mechanism.

The methodology designed by the Treasury is structured in three phases: a base remission of 19% of the outstanding debt at the end of 2023; an adjustment to balance the autonomous regions that remain below that average; and a third stage that equals the adjusted savings per inhabitant and considers the exercise of fiscal powers, especially in personal income tax. The Basque Country and Navarre are left out due to their foral regime, although both have proposed receiving compensatory treatment.

The Government analyzes assuming “a certain degree of deficit“.

In parallel to the decision of the Council of Ministers, the Vice-president of the Government and Minister of Economy, Finance and Innovation, Antoni Costa, defended before the Parliament that the Balearic Islands can assume “a certain degree of deficit” in the event of an economic crisis. According to him, although the structural expenditure is “consolidated”, the evolution of the income allows maintaining the stability, as reflected by the 644 million collected by the ITP until November, 75 more than in the previous year.

Costa added that he does not foresee a sharp decline in the real estate market affecting this revenue stream and recalled that the Balearic Islands closed 2024 with a provisional surplus of 114 million, the fifth in a row. In his opinion, the combination of financial reorganization and debt cancellation offers the community an additional margin to face an eventual deterioration of the economic cycle.