16-11-2018

The Balearics finance minister, Catalina Cladera, has been fleshing out what the agreement for the new special economic regime (REB) will mean.

At the meeting with President Armengol on Wednesday, Prime Minister Sánchez accepted an arrangement which, in its totality, will benefit the Balearics to the tune of some 500 million euros a year. This is made up by an upper limit of 150 million euros from the insularity fund (to compensate for being an island region), 270 million euros of fiscal measures, and 70 million euros because of the increase in the residents travel discount to 75%.

In explaining the arrangement, Cladera suggested that the deal "more or less" is in accordance with what had been sought. This is despite the fact that it bears great similarity to the one advanced by the former national government, which the Balearics had not considered to be acceptable.

The finance minister added that the REB will come into effect at some point in the first half of next year and that it will be subject to "the small print" being applied by her counterpart in Madrid, the national finance minister, María Jesús Montero. Cladera called on all political parties to back the arrangement in Congress, but as Sánchez said after the Wednesday meeting, he may - if necessary - have to issue a decree law to approve the arrangement. This is because he still doesn't have backing for the full budget and so may have no other alternative than to make a decree.

In terms of fiscal measures, these principally seem to apply to IVA (VAT). A separate and lower rate is being envisaged for certain categories, such as hotels, water treatment and transport operations.

Of opposition parties, El Pi have reacted by saying that it is all a "marketing exercise". The party is particularly critical of the claims for the insularity fund, saying that it has nothing to do with compensating for insularity. The Partido Popular say that they are "very disappointed" and point out that there is no firm date when the REB will start, while the proposals that the Rajoy government had made would have definitely come into effect on 1 January next year.