The new framework for the Spanish regional (autonomous) governments

Pablo Hernández de Cos

Economic Bulletin, 2002, issue JUL, No 3, 67-74

Abstract: Fiscal decentralisation has been one of the distinctive features of the Spanish public sector in recent decades. Decentralisation commenced with the approval of the Spanish Constitution in 1978. This enabled the regional (autonomous) governments (RGs) to be set up and reformed the territorial organisation of the State. Since then, responsibilities for managing certain services have gradually been transferred from the State to the RGs and the arrangements for financing these responsibilities have been developed. The design and implementation of fiscal policy in Spain, meanwhile, has been governed since the mid-1990s by the need for budgetary consolidation, first, to qualify for Stage Three of Economic and Monetary Union and, subsequently, to comply with the Stability and Growth Pact, whereby all EU countries must ensure that their budgetary positions are close to balance in the medium term. The need to reconcile these two elements (fiscal decentralisation and budgetary consolidation), has highlighted the usefulness of developing rules of fiscal discipline that bind the different levels of government, as well as creating a regulatory environment for the RGs that ensures a degree of financial autonomy consistent with the level of spending responsibilities assumed. It is against this background that two pieces of legislation have recently been approved by las Cortes (the Spanish parliament). These are, the Budgetary Stability Law, which, inter alia, strengthens the mechanisms for co-ordination between the State and the RGs, so that the latter more closely participate in the general macroeconomic stability objectives, and the new arrangements for financing the ordinary-regime RGs agreed by the Fiscal and Financial Policy Council (CPFF) in July 2001, which contain significant changes to the previous financing arrangements. This article analyses the content of both pieces of legislation and their implications in terms of the institutional environment within which the RGs operate. Section two describes the legislation and section three assesses it. The article ends with a section of conclusions.

Date: 2002
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