Spain's government to assume up to $97 billion in regions' debt

By Inti Landauro

MADRID (Reuters) -The Spanish government announced plans on Tuesday to absorb as much as 83 billion euros ($97 billion) in debt held by regional administrations in a move aimed at freeing up more resources at a local level, Budget Minister Maria Jesus Montero said.

The idea was initially proposed as a sweetener for Catalonia as part of negotiations to form a government in late 2023 when Madrid offered concessions to the wealthy northeastern region that had unsuccessfully tried to secede in 2017.

"Less debt means more welfare state, this implies the regions will be able to dedicate more resources to these policies that are so important for equality," she said.

The measure, however, faces challenges in parliament, where the leftist coalition government lacks a majority.

The move does not affect Spain's overall public debt, which stood at 103.4% of gross domestic product as of June, as regions' liabilities are already included in the calculation, Montero told a news briefing.

When the plan to absorb between 18% and 50% of individual regions' liabilities was first announced in early 2025, Fitch Ratings said the move would be credit positive and could lead to some positive rating actions on regional debt.

The conservative opposition People's Party, which runs several regions, has said it would oppose the bill as it rewards the more profligate regions.

Montero also said the government would soon submit to parliament the so-called stability path proposal that is the first step towards coming up with a budget bill for 2026, and that ministries had been told to submit their spending plans.

Spain has rolled over its 2023 budget twice without even presenting a bill in the fragmented lower house, where the government faces a balancing act in every vote as it weighs concessions to several parties from across the spectrum.

($1 = 0.8542 euros)

(Reporting by Inti Landauro and Andrei Khalip; Editing by Ros Russell)