Spanish government approves €17bn debt relief for Catalonia

The Spanish government approved on Tuesday a draft law to forgive part of the debt of the country’s autonomous communities.

In total, €83.3 billion will be forgiven, with €17 billion allocated to Catalonia. Andalusia will be the biggest beneficiary, receiving €18.8 billion, followed by Catalonia and Valencia with €11.2 billion each.

The measure stems from an agreement between the governing Socialists and pro-independence Esquerra Republicana in exchange for their support of PM Pedro Sánchez’s investiture.

For Catalonia, the debt relief will reduce nearly 20% of the regional government’s total debt.

The allocation for each autonomous community was calculated based on population, per-capita debt forgiveness, and tax contributions.

The measure has drawn heavy criticism from the opposition People’s Party, though the government noted that seven out of ten euros of debt forgiveness will benefit communities governed by the PP.

Leading the opposition is the Community of Madrid, which is not adhered to the Fund for Autonomous Liquidity (FLA) but would have €8.6 billion written off if it were included in the plan.

The Spanish government has denied that the measure benefits only Catalonia, pointing out that Andalusia will see 47% of its debt forgiven and the Canary Islands more than 50%.

Finance minister María Jesús Montero stressed that the debt relief will not affect the country’s public deficit or overall public debt.