Four Spanish autonomies have a debt of more than 30% of their GDP. They are more than the limit that was considered the maximum allowed by the last legislature of Mariano Rajoy and served as a reference before the pandemic left all controls of this type suspended. With that measure in mind, the current largest number of freeholders are Valencia (44.4%), Castilla-La Mancha and Catalonia (both with 33.4%) and Murcia (32.2%).
On the contrary, according to the report of BBVA Research Debt of Autonomous Communities, only three autonomies have a debt of less than 14% of their regional GDP. Specifically, the least indebted region is the Community of Madrid, with 13.5%; followed by the Basque Country, with 13.7% and the Canary Islands, with 13.7%.
When looking at the amount of debt, Catalonia (26.6%), the Valencian Community (17.4%) and Andalusia (11.9%) concentrate 56% of the debt in the region of Spain. Regarding debt per capita, the two most indebted communities: Catalonia and the Valencian Community, triple the debt level of the least indebted.
BBVA Research points out that until 2007 the regional debt remained at a moderate level, with an average interannual growth rate of 7.3%. That year, the debt of the autonomies was 61,960 million euros, 5.8% of GDP. However, he explained that the financial crisis that erupted in 2008 caused debt in the autonomous communities.
In this way, between 2008 and 2015 the regional debt grew at a rate of 20% per year, reaching 25% of GDP. Between 2015 and 2020 it stabilized at around 24% of GDP, but it rose again with Covid-19. As a result, in 2022 it reached historical heights, exceeding €316.8 billion, 23.9% of GDP.
The report shows that the instruments used by autonomous communities to finance themselves are evolving depending on market conditions. Therefore, between 1995 and 2011, the issuance of securities gained weight. At that time, on average, the issuance of securities represented 47% of total financing compared to 53% of loans.
However, the closure of the markets in 2012, due to the financial crisis, and the entry into force of liquidity mechanisms, such as the Autonomous Liquidity Fund (FLA), reduced the weight of these financial instruments.
The observatory explained that the FLA is part of the mechanisms created by the central government in 2012 to provide liquidity to the autonomous communities during the closure of the financial markets.
Currently, the FLA represents almost 59% of the regional debt compared to 14% of the securities issued in the market. Starting in 2020, some of the communities once again turned to financial institutions to raise financing and the loans increased in weight until they represented 27% of the regional debt.
Regarding financing costs, the study points out, liquidity mechanisms reduce the cost of debt in the region. Those communities that have not resorted to FLA financing and are financed directly by the market, register a higher implicit rate on their debt. Meanwhile, in general, communities with higher levels of debt and greater reliance on FLA have lower debt costs.
Without it, they continued at BBVA Research, the communities would have to assume an additional average cost of more than 1 percentage point, which would put their debt 2 points of GDP above the level of 2022.