Always the finance in Spain

Andrew EdeMajorca-International13/10/2020 00:10

The weekend opinion poll revealed that 60% of Balearic citizens believed that the Spanish government has not given sufficient Covid-crisis financial support to the Balearic government. This view is unsurprising. Sufficient or not, the narrative is always the same - central government funding is insufficient - while when one considers items of emergency finance, the amounts, on the face of it, can indeed seem insufficient. There was the 105 million euros handout from a 6,000 million euros pot for health emergency finance for the regions - 1.75% of the total. But based on population, the amount wasn't a million miles out.

The Balearic government's budget-setting process for 2021 will be an almighty difficult task. Local tax revenues have been shot to pieces (e.g. property sales tax, tourist tax) and there is no certainty at all that these will recover in 2021. The government can do no more than guess.

The more recent narrative is that of regional economy devastation because of the collapse of tourism. The Balearics cannot therefore provide the level of revenue from income and corporation taxes and VAT to the central pot for eventual redistribution to the regions. Nor will the Balearics be able to in 2021. For once, the financing system can genuinely be said to penalise the Balearics. Rather than be a net contributor, the islands should be a beneficiary. The previous strength of tourism-linked revenues has been exposed as a huge weakness. The financial allocation should reflect this. But it won't. Public opinion is not entirely wrong.