The Ministry of Finance has convened the Fiscal and Financial Policy Council (CPFF), which brings together government and local communities, at noon next Monday. The purpose of the department, for which María Jesús Montero will lead this conference, is to make municipalities aware of the proposal to distribute the deficit between different administrations and, as a result, to exchange views on the situation of local finances and the possibilities for their reform. The appointment is one of the important preliminary steps before the executive branch approves in the Council of Ministers the two pillars that will form the basis of the 2026 general national budget: spending caps and fiscal channels.
The meeting will feature the ministry’s proposals for municipal budget stability and public debt targets from 2026 to 2028, according to Treasury and community officials. The agenda also includes an update on the status of regional financing system reform, but ministry officials are adamant that there are no private proposals.
With this call, the Ministry of Finance aims to speed up the budget process, which has been racked with apparent delays against the statutory schedule. The constitution requires draft accounts to be submitted by October 1, but the government has missed the deadline for the third year in a row, opening the door to a possible new extension for the final 2023 accounts.
Deficit allocation is a particularly sensitive issue for both central and local governments, and much of it is in the hands of the PP. Every year, the four subsectors that make up public administration (central administration, autonomous communities, local bodies, and social security) must comply with fiscal limits that together cover the national deficit.
Last year, the Treasury proposed allocations that would allow the central government an imbalance of 2.2%, 1.8% and 1.5% in each of the three years for the period 2025-2027. Social security was allocated a deficit of 0.2% annually, while autonomous communities could reach anywhere from 0.1%. To square the circle, local entities need to move toward balanced budgets or zero deficits. The aim was to achieve joint red figures of 2.5%, 2.1% and 1.8% of GDP respectively. The proposal subsequently failed to pass a vote in parliament, where the PP, Vox and Junts presented a common front for various reasons.
In theory, the government has the upper hand on the CPFF, as the Treasury only needs to at least vote in favor of autonomy to carry out its proposal, regardless of what happens next with Cortes. However, the meeting is expected to be tense due to the expected refusal of the PP community and the precedent it set several months ago when it stood up to Minister Montero at the last meeting convened to discuss a partial reduction in regional debt.
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