• Autonomous Communities: The PP communities reject that the Treasury compensates the VAT through the deficit

The Ministry of Finance has raised this year's spending rule for local corporations by up to 2.9% and will launch an extra FLA (Autonomous Liquidity Fund) to give them more margin, as has planned for the autonomous communities, in order to compensate for the effect of the pending VAT of 2017 , which the FEMP amounts to 750 million and that will be deducted from compliance with the expenditure standard, while again having set a target for zero deficit

This was announced by the Minister of Finance, María Jesús Montero , accompanied by the Minister of Territorial Policy and Public Function, Carolina Darias, at the press conference following the meeting of the National Commission of Local Administration (CNAL) who have chaired this Monday in Madrid, another step towards the presentation of the General State Budget (PGE) of 2020.

Montero explained that the budget stability path for the period 2020-2023 has been transferred to the local entities, which again contemplates a zero deficit target for the municipalities, which currently present a surplus of between four and five tenths. In addition, a public debt target of 1.9% of GDP has been set.

To compensate them for the effect of the 2017 VAT pending payment, Montero has announced that the modification of the spending rule has been proposed to raise it from 2.8% to 2.9%, which will grant a tenth of a margin to the municipalities , and the effect of VAT on compliance with the spending rule will be discounted, given the impossibility of paying the VAT result in 2019, a cause "not attributable to the municipalities or the Government that tried to correct the situation without success."

Extra FLA

In addition, the Treasury will also launch an extra FLA for indebted municipalities so that outstanding invoices are paid "in a timely manner" in order to avoid increases in the payment term to suppliers.

In this regard, Montero has chosen to be "prudent" and not give a figure of the amount pending payment for VAT of 2017, given the high volume of number of municipalities, although it has indicated that it will be specified with the FEMP, which figure the amount outstanding at 750 million euros , and that the data is "transparent". "There is no trap or cardboard," he added.

The president of the Spanish Federation of Municipalities and Provinces (FEMP), Abel Caballero, has celebrated the measures because the figures are "perfectly realizable" by the municipalities, since they present a surplus of around 0.4% or 0.5 % of GDP, accumulating eight fiscal years with surpluses and an amount totaling 25,000 million euros.

In turn, he believes the increase in the spending rule because it will mean that the spending ceiling will be above and has indicated that the debt ratio of the municipalities is already at 1.9% of GDP.

Sustainability

Another issue that has been addressed within the framework of the CNAL is that related to financially sustainable investments , on which Montero has transferred that the "commitment" of the Government so that these investments can be undertaken within two years (one for programming and other for execution), and thus avoid difficulties when planning.

For its part, Caballero has requested that the two-year period to undertake financially sustainable investments be consolidated by translating into the Budget Stability Law, and has demanded that a line of deposits be opened at the Bank of Spain at zero interest rates for that local entities can maintain the 26,000 million remnants that they cannot spend or use on non-speculative financial assets.

In addition, it has requested that the catalog of financially sustainable investments be extended, for example to catastrophes. In this regard, the minister has assured that the possible incorporation of more investments into the catalog will be studied with the FEMP. On the other hand, on the municipal capital gain Montero has explained that on the occasion of the dissolution of the Cortes the bill to modify this tribute, although it has affirmed that a measure will be promoted in Congress regarding this tax.

Caballero has advanced that the FEMP will meet with the different groups to request that the issue be addressed "as soon as possible" in Parliament.

New path

The compensatory measures proposed by the Treasury for the municipalities are in line with those planned for the autonomous communities. The Fiscal and Financial Policy Council (CPFF) last Friday approved the relaxation of deficit targets for the regions, establishing a deficit of 0.2% of GDP this year, 0.1% in 2021 and budget balance since 2022 .

With this path, the Government gives more flexibility for compliance, since the regional objective initially planned by the Sanchez Executive was a deficit of one tenth of GDP this year, and that the regions achieved budgetary stability already next year.

In fact, the path that the PP approved established budgetary balance for the autonomous communities already for the year 2020. For the regions, the Government has planned to discount the effect of the 2017 VAT on the calculation of the 2019 public deficit as well as the implementation of an extra FLA.

The spokeswoman of the Government and Minister of Finance has insisted that the new path of budgetary stability for the set of administrations will be approved in "the next Councils of Ministers", although it is very likely to see the light this Tuesday, as they told Europa Press in government sources.

The current and official budget stability path, approved by the Government of Mariano Rajoy in 2017, set a deficit target for the State as a whole of 0.5% of GDP by 2020 and budget stability as early as 2021, virtually unattainable goals.

Alongside the path, the new macroeconomic picture on which the draft Budget will be drawn up is likely to come to light.

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  • Carolina Darias
  • State's general budgets
  • Maria Jesus Montero
  • Public deficit

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