The report paints a bleak picture for government finances.

16-08-2020

The Balearic government faces a grave financial situation. In the first quarter of the year, the total debt rose to 9,004 million euros, equivalent to 26.4% of regional GDP. The AIReF independent fiscal responsibility authority says that the debt will continue to rise over the coming years and that it will be 2042 before the debt can be brought down by 50% (to 13% of GDP) and not 2033, which has been the government's target.

An AIReF report states that the prospects for 2021 and 2022 will worsen "significantly" compared with 2020. The report calculates that there will be a reduction of between six and nine per cent in the system of financing, while it notes that the Balearics will not receive extraordinary funding from the rescue fund for the regions in 2021. Although the government could go some way in compensating for the lower income through its own tax-raising means, the AIReF estimate is that there will be between ten and thirteen per cent less revenue next year.

For 2022, the report suggests that the situation could be worse. There will not be the capacity to increase revenue from the Balearics own taxes, while it is highly improbable that the region will get the settlement from the system of financing.

Under this system, which is principally the redistribution of state revenues raised by the regions (income tax, VAT) by the Spanish government, there is an advance and then a settlement; the latter is usually made two years later. AIReF anticipates that the Spanish government will probably forward more to the Balearics this year than the region should really get. Therefore, there won't be a settlement for this year's account in 2022.

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