The Ministry of Finance has set the deficit target for autonomous communities at 0.1% of GDP for 2027, 2028, and 2029, while the State reserves the majority of the total public deficit of 1.8% of GDP. The regional expenditure rule will be 4% in 2027.
The Ministry of Finance has already decided how the projected deficit will be distributed for the coming years. Autonomous communities will have a capacity to generate a deficit of 0.1% of GDP in 2027, a target that will also be maintained for 2028 and 2029. The State, for its part, will reserve the majority of the total public deficit, which for 2027 is set at 1.8% of GDP, although the department has not yet specified the exact figure that the central administration will assume.
This was announced by the Minister of Finance, Arcadi España, during the Fiscal and Financial Policy Council (CPFF) held this Monday. The 0.1% target for the autonomous communities is the same that the Treasury has been proposing for years and has traditionally been considered insufficient by parliamentary groups, which is why they have not approved the deficit target when the stability path has been taken to Congress.
More margin for the State, less for the regions
Having a larger deficit target means having greater capacity for public spending for the corresponding administration. In this distribution, the State retains the largest share of the pie, while the communities must adjust to a very narrow margin. Sources from the Ministry of Finance assure that, with the proposed percentage, "the communities will not have to make any fiscal effort during the period, unlike the central administration."
The same sources specify that "the deficit margin for the communities amounts to 5.849 billion euros". In other words, voting against the targets would mean that the autonomous communities would forfeit that spending margin, something that regional governments have already indicated they might do if they do not achieve a more favourable distribution.
Expenditure rule of 4% for 2027
Arcadi España has also informed the regions that the expenditure rule will be 4% in 2027. This means that the increase in public spending by the autonomous communities next year can be, at most, 4%. It is a limit aimed at containing the growth of regional spending in a context of fiscal consolidation.
The Government has defended that this path is compatible with the improvement of public services and that the communities have sufficient resources if they manage their budgets well. However, several regions have already expressed their rejection of these targets and announced that they will vote against them in the CPFF, opening a new front for negotiation in the coming days.
Regional financing without reform
In parallel, the Ministry has indicated that total regional financing in 2027 will exceed 8%, although without yet applying the reform of the regional financing model, which remains pending. This means that the communities will receive more resources through state transfers, but without structural changes in the distribution system.
For the autonomous communities, this scenario poses a double challenge: on one hand, a very limited deficit margin for the next three years; on the other, an expenditure rule that conditions their budgets. Those who expected a greater margin to promote expansive policies will have to settle for contained spending growth.
The next step will be the voting on the stability path in the CPFF and, subsequently, its processing in the Congress of Deputies. There, the Government will need support to push through objectives that, for now, face rejection from the majority of communities and opposition groups.
For readers interested in regional economics, the key is that the communities will have to prioritise spending and, likely, adjust their accounts to comply with the 0.1% deficit. Those expecting large public regional investments in the coming years will face a fiscal restriction landscape, unless the Government agrees to raise the targets.
You may also like
