Airef warns of the accounting mess that is coming with the removal: it can force the government to an unprecedented cut of spending

The Government is willing for State accounts to assume 83,252 million euros of debt of the Autonomous Communities, already this heights already clear that the movement will not reduce Spanish public debt but will only transfer a liability that today appears in the indebtedness of the different autonomies towards the accounts of the State, which is true, it is financed at a lower cost.

The operation, the rating agencies have already remembered, will reduce the growing burden of interest that were coming to the autonomous communities – in a amount that the Minister of Finance, María Jesús Montero, estimated last Wednesday in a fork of between 6,500 and 7,000 million euros – and at the same time it will also raise the interest account of the State, which has already been warned can also face a higher financing cost in the markets.

However, these will not be the only consequences of the operation. The Independent Fiscal Responsibility Authority (Airef) has warned this Thursday in a technical note on the stormy (politically) meeting last Wednesday between the Treasury and the regional governments of an accounting effect, which is likely that the promoters of debt forcononation have been passed but that it can compromise the government’s budget management in the coming years.

«There is another aspect that is important in this process of consolidation of the debt and is the treatment that in national accounting has this type of operations«, Warns the institution that ensures the rigor of budgetary and accounting management in Spain. Apparently, in terms of national accounting, which is the methodology used by the European Commission to measure the fiscal compliance of the countries, debt condonations are recorded as a capital transfer that computes as an income for autonomous communities and as an expense for the State.

«The nature of the transfer would affect the calculation of the expenditure rule of the central administration that You could see its expenditure capacity restricted by 83,000 million in the year of the condonation «.

Unprecedented adjustment

Airef emphasizes that the impact will depend “on the nature of this transfer”, but the unforeseen absorption of 83.ooo million euros of spending within the already limited margin that allow the new European fiscal rules, they will force the government, of not obtaining a European endorsement to dodge this accounting trap, to a cut of public spending from the unprecedented state.

Airef, in fact, also warns the government that it would have to limit the use of the autonomous communities of that virtual income, possibly in order to prevent them from being used to achieve the deficit objectives dodging the forced containment of their expenses.

Concern for fiscal discipline is going through the entire Airf report on the damage of debt raised by the Government. «It makes no sense to make a debt forgiveness If it is not guaranteed that future debt will not be accumulated above what the fiscal rules allow, ”says the agency chaired by Cristina Herrero.

For this reason, as María Jesús Montero already advanced, the institution has urged the Government to establish some type of conditionality on the autonomous communities benefiting from the operation to ensure that they adjust at least their expenses to what Brussels require. Airf does not convince him that the debt forcononation is taken out of the autonomic financing system because he understands that the problem will hardly be resolved if the origin of the same will be resolved if the origin of the same will be resolved. cast. In this sense, it advises the Government to eliminate the prize that guarantees the CC.AA. that upload the IRPF between 2010 and 2022 for some formula that also takes into account the expense.

The president of the Airef, Cristina Herrero, participated on Wednesday in the meeting of the Fiscal and Financial Policy Council (CPFF), where she transferred to the participants the conditions that the institution, as guarantor of the financial sustainability of public finances, considers that it must include the agreement for the condonation of the debt of the autonomous communities (CCAA).

For the independent authority, “it is no longer” reinforce compliance with tax rules With a fiscal conditionality associated with the process of debt forgiving since, in addition, the Autonomous Liquidity Fund does not disappear, so that both the deficits recorded in the exercise and the excesses of deficit generated in previous years would continue to be financed through it.

For airf, the required fiscal conditionality should take into account The starting position of each communityas well as its relative position regarding a financing system whose reform has not yet been resolved.

Thus, Airef considers that the condonation proposed “is not enough” To end the permanent interim of the mechanisms that were born as extraordinary in the financial crisis of 2008 and became permanent.

Computable spending, the key variable

On the other hand, Airef considers that the distribution criteria of phase 3 contains “a very partial approach”, taking into account the upward exercise of the regulatory competences in IRPF as approximation of the effort made by the communities.

Therefore, with all the limitations it may present, the agency considers that The variable that best reflects This effort would be precisely the computable expense, since the effort can come on both the expenditure side and the income side. The fact that computable expense is defined as a net expenditure of entry measures would allow both options to be taken into account.

There is another aspect that is also important in this process of debt consolidation, according to Airef, and it is the treatment that this type of operations have in national accounting.

As explained by the agency, in national accounting, the counterpart of a debt forcononation is a capital transfer that goes, in this case, of the State to the Autonomous Communities. This implies that, in the year of the forcononation, there is an increase in the income of the autonomous communities and an increase in state spending for an amount of 83,000 million.

The impact of this transfer in spending will depend on the nature of this transfer and that it does not occur in practice, as in previous years, A primacy of deficit objectives About the spending rule.

The nature of the transfer would affect the calculation of the expenditure rule of the central administration, which could see its expenditure capacity restricted by 83,000 million in the year of the foronation.

On the autonomous side, Airef believes that it would be necessary to break with the traditional primacy that the deficit objective has in practice, despite not having normative support.

In this sense, the independent authority It is necessary to limit The use of the increase in autonomic income in the year of the forgiveness, which could be done through precisely the fiscal conditionality that must accompany the condonation process.

Condonation will involve interest savings

For its part, the Airef has pointed out that the sentence will mean an interest savings that It implies a deficit reduction of the CCAA and an increase in the central administration. However, it is necessary to consider that interest is not included in the calculation of computable expense for the purposes of the expense rule.

Consequently, this saving does not modify the calculation of the spending rule And, therefore, it does not generate a greater margin of spending in other public policies.