Spain's Regional Funding Plan Faces Backlash Amid Political Divisions

Political Tensions Over Regional Funding

By Victoria Waldersee

Backlash from Regional Leaders

MADRID, Jan 15 (Reuters) - A new fiscal model proposed by Spain's finance minister for its regional governments has faced a heavy backlash from regional leaders, who accuse the central government of toying with public finances to win political favours as it struggles to hold its fragile coalition together.

Concerns from Economists

The Socialists, who head a minority coalition government, struck a bilateral deal with Catalonia at the behest of separatist party ERC that guarantees the region will receive the same amount in services as it pays in taxes, while other governments receive varying amounts.

Government's Response

That has infuriated the country's other regions, with some threatening to take the state to court for, they claim, contravening the constitutional principle that no territory should be given a financial advantage over another by the central government.

Economists and ratings agencies have also expressed concern over an additional 21 billion euros promised in the model by the state to regional governments, worsening Spain's fiscal position when it is already buckling under the strain of higher pensions and pressure to boost defence spending.

Nuria Bosch, economics professor at Barcelona University, said the deal was on paper better for all the regions. 

"But it bears the stamp of having been put forward by the separatists, which creates resentment in many autonomous communities."

MONTERO DECRIES OPPOSITION'S 'INFANTILE POLITICS'

The standoff comes as disputes with splinter parties across the political spectrum from hard-left Sumar to separatist Junts have crippled the Socialists' ability to pass policy, leaving Congress in a deadlock with a year to go until scheduled national elections.

Spain's central budget is still being rolled over this year from its 2023 version after it failed last November to secure backing from the conservative opposition People's Party, hard-right Vox and hard-left Podemos for a new proposal.

Finance Minister Maria Jesus Montero admonished the opposition for critiquing the model without presenting an alternative, accusing its leaders of playing "infantile politics" and lying about the benefits of the new system.

Still, all but one of the country's 17 autonomous communities, including those run by the same Socialist party leading the central government, remained staunchly opposed after lengthy talks with Montero on Wednesday. She will now begin a round of bilateral talks with each government in a bid to change their minds.

(Reporting by Victoria Waldersee, editing by Aislinn Laing and Hugh Lawson)