Spain sends autonomous communities the financing reform draft agreed with ERC, with no alternative for those that reject it

The draft and the ERC pact

The Ministry of Finance, headed by Arcadi España, sent the detailed draft of the new regional financing model to all autonomous communities on Friday. The document maintained the bases and content agreed with Esquerra Republicana de Catalunya (ERC) and its leader, Oriol Junqueras, presented in January, without substantial modifications. The government had wanted to open a debate process, but the fact that PP-governed communities did not participate in the meetings meant the model remained as announced.

Aquellas Comunidades Autónomas y Ciudades con Estatuto de Autonomía que no acepten el Modelo recibirán la financiación que, a todos los efectos, derive de la aplicación de la Ley 22/2009.

Figures and distribution

The proposal projected a total injection of 224.5 billion euros for 2027, an increase of 20.975 billion compared to the current model and a significant rise from the 152.484 billion of the 2023 base year. For Catalonia, the model would increase annual resources by 4.686 billion euros. The Valencian Community would receive an additional 3.669 billion euros per year, an increase of almost 18% compared to what it would receive in 2027 under the current system.

The mechanism and the threat

Article 10.1 of the proposal warned that communities that do not accept the model will continue under Law 22/2009 of 18 December, which regulates the common-regime financing system. The minister offered no alternative, levelling fund, or improvements for underfunded regions that do not join. Fourteen of the fifteen affected common-regime communities expressed rejection, including the twelve governed by the PP plus the socialist Asturias and Castilla-La Mancha. Emiliano García-Page, president of Castilla-La Mancha, demanded that Pedro Sánchez rectify and call a conference.

The Valencian Community case

The Valencian Community emerged as one of the territories most benefited in percentage terms. The improvement guaranteed, according to Treasury sources, that Valencian citizens would have the largest volume of funds in their history for healthcare, public education, dependency care, and the rest of basic social services. The positive impact responded to the fact that it would receive funds simultaneously through vertical and horizontal levelling, and it was among the areas that would capture most resources through the new climate fund and the VAT mechanism for small and medium-sized enterprises.

No hay elementos objetivos para oponerse a un modelo que beneficia al conjunto de las Comunidades Autónomas.

Political response and next steps

Arcadi España insisted that his department remained open to dialogue and would convene the communities on 29 July in a Fiscal and Financial Policy Council. A technical committee meeting was scheduled for 14 July. The minister criticised the refusal to negotiate by PP-governed communities and their rejection of the 2027-2029 stability objectives, a stance that would cost the Valencian Community 549 million euros. The intention was that, after the Fiscal Council, the proposal would go to the Council of Ministers after the summer and then to the Congress of Deputies for parliamentary approval, with the aim of entering into force in 2027.

The fiscal reform

The reform included an increase in the percentage of personal income tax ceded to the communities from 50% to 55% and of VAT from 50% to 56.6%. The criterion of adjusted population was updated to determine the real spending needs of each community, with demographic and geographical variables redefined.