canary islands fiscal rule criticised cpff

Canary Islands demands end to ‘incoherent’ spending cap

Canary Islands takes aim at ‘incoherent’ spending rules

The Canary Islands government attended the Fiscal and Financial Policy Council (CPFF) on Monday with a clear and critical position regarding the application of the 2024 fiscal rules. Despite maintaining a ‘constructive’ willingness after the long period without meetings of this body, the regional Minister for Finance, Matilde Asián, denounced the ‘incoherence’ of the current spending control system for the islands before entering the meeting.

Core dispute: A mismatch between income and spending limits

The central demand from the Canary Islands is based on a discrepancy between the numerical quantification of the spending rule and the actual revenue the autonomous community receives through the funding system. According to the minister, income is expected to be higher than the spending limit permitted by the state. This technical situation forces the Canary Islands to generate a surplus which, by regulation, must be used exclusively to reduce public debt, in other words, to pay banks.

The regional government argues that this measure ‘makes no sense’ for a community like the Canary Islands, which currently maintains debt levels far below the established target. Consequently, the Canary Islands’ proposal is for this rule to be relaxed so that resources can be invested in public services and regional needs rather than being directed solely towards financial institutions.

Previous breach and extraordinary spending needs

The demand comes after the Canary Islands breached the spending rule by €444 million in 2024 and submitted an economic-financial plan to the Ministry of Finance. The regional executive has defended that this overspend allowed it to address extraordinary needs, such as the reconstruction of La Palma, the care of unaccompanied migrant minors, and the payment of court judgments.

Wage agreements and state compensation

A point of particular concern for the regional executive is the effect of the wage agreements reached by the national government with the trade unions. Asián highlighted that these state-level decisions directly affect the budgets of the autonomous communities, yet without any clarity on how these additional costs will be compensated financially. The Canary Islands warns of a double contradiction in this regard: if the state does not transfer additional funds to cover these wage increases, the community is forced to divert that money from other essential priorities and budget lines for citizens. Furthermore, the wage increases agreed by the central government are, in practice, higher than the spending rule that the same state seeks to impose on the autonomous communities.

Uncertainty over state budget progress

Regarding the processing of the General State Budgets, the Canary Islands recognises that the CPFF is a necessary formal step, but one whose real effectiveness is uncertain. Given that the Council’s report is not binding and considering the ‘very complex composition of the chamber’ that exists today, the minister pointed out the difficulty of knowing whether the state accounts, which would provide security for regional economic planning, will ultimately be approved.

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