Antoni Zabalza

Restructuring proposal for the Spanish regional debt

Spanish regional public debt as percentage of GDP was practically constant, around 6%, between 1955 and 2007. From 2007, due to the Great Recession, regional public debt increased significantly up to a maximum of almost 25% in 2016, and gradually stabilized afterwards. In 2019, regional public debt was 23.7% of GDP. The Spanish regional finance system has not been designed to manage such high levels of debt. In fact, from 2012 onwards most regional governments would have incurred in default had it not been for the financial assistance obtained from the central government. This sequence of events is not surprising: regional governments are responsible for essential services such as health and education, and their revenues, due to the updating mechanism of the regional finance system, depend on the variation of the main national taxes and, therefore, on the economic cycle. Given that, it is not surprising that sooner or later regional governments had to incur in large amounts of debt to finance their expenditure responsibilities. This article argues: i) that the present lack of connexion between expenditure needs and the resources that the regional finance system puts at the disposal of regional governments must be redressed by reforming the updating mechanism of the system; and ii) that the huge debt burden of regional governments accumulated during the Great Recession must be eliminated by means of a properly designed restructuring plan.

Keywords: Regional debt; debt restructuring; updating mechanism; expenditure needs; soft budget constraint; moral risk

Check other articles from the issue Issue 50 – Summer 2021 or from other issues.

To cite this article

Zabalza, A. (2021). Plan de saneamiento de la deuda autonómica. Investigaciones Regionales - Journal of Regional Research, 50, 71-103.