Communities have stepped on the accelerator of investment in this last year of the European recovery plan’s validity. Between January and June, the pace of regional investment was 21% higher than the same period last year and exceeded 7 billion euros. This is reflected in the latest budget execution report of the autonomous communities, published this Thursday by the Ministry of Finance. The document also quantifies the sharp rise in financial costs at a time when the cost of money is rising again to counter inflationary escalation: the interest bill is already around 3 billion euros, 20% more than a year ago.
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The European recovery fund, a huge amount of resources in the form of grants and loans, was approved at the beginning of 2021 to speed up the economic reactivation of the community bloc after the covid-19 pandemic crash, also allowing the financing of projects and investments started the previous year. After more than six years in operation, last August the deadline expired for member states to certify the execution of the milestones and objectives contained in the national plans, that is, the reforms and investments they committed to with Brussels in exchange for receiving aid. Before the end of this September, capitals will have to send the last payment requests to the European Commission and in December the deadline expires for the community executive to unlock disbursements.
With these elements, the rate of change of capital operations has advanced steadily in the accumulated period from January to June at the regional level, both in terms of real investments and capital transfers. In the first case, which indicates projects carried out directly by the communities, recognized obligations have grown by 26.6%, while the second item, corresponding to transfers to other bodies, has experienced a 16% increase. The largest volumes are those of Andalusia, Galicia, Castilla y León, and Madrid.
Interest expenditure
After investments, the other spending item that grows the most is related to debt payment. “Obligations related to interest expenses, therefore considering a maturity criterion, increase by 20.85%,” the Ministry of Finance’s budget execution report states. These data reflect the rising cost of financing recorded in recent years, which has led the regional financial burden to double between 2022, the year of the first inflation flare-up due to the Russian invasion of Ukraine — and the consequent rate hikes by the European Central Bank (ECB) to curb it, with the latest increase carried out this Thursday — and 2025, rising from about 3.6 billion to more than 7 billion.
La Rioja, Cantabria, and Murcia are the communities that, in percentage terms, have seen their interest bill grow the most in the first half of the year, although the largest volume burden corresponds to Catalonia and Madrid. According to a projection made by the Fedea study center, the burden for regional debt payment will reach 11.528 billion euros in 2029, since communities are financing themselves at higher costs and the refinancing of maturities will occur at rates higher than those of the amortized debt. The burden for the State will also rise: an increase in interest spending of 50% between 2025 and 2030, exceeding 60 billion euros at the end of the period.
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