Costa distances himself from the 'no to everything' stance of the majority of PP men: "The Islands will be involved in the negotiation of the financing system"

PalmDespite the climate of distrust between the PP and the Spanish government, Marga Prohens's administration is open to negotiating the PSOE's financing proposal. This was explained by the First Vice President and Minister of Economy and Finance, Antoni Costa, who, despite acknowledging that he attended the meeting of the Fiscal and Financial Policy Council (CFF) with "skepticism," left with some hope of including the Balearic Islands' demands in the new regional financing model. "This proposal is only from the grassroots level, but it is negotiable, and we will participate," he assured. "The Islands will be involved in the negotiations on the financing system," he concluded.

With these statements, Costa has distanced himself from the "no to everything" stance of most male members of the People's Party (PP), who, for now, have not been open to joining the new model should it succeed. However, there is another PP leader who is eyeing the possibility of improving the system with interest: the Minister of Economy and Finance of the Valencian Regional Government, José Antonio Rovira Jover. Both the Valencian Community and the Balearic Islands are among the territories most disadvantaged by the current distribution.

The Vice President of the Balearic Islands made these statements after accusing the Spanish government of having started the negotiations "very badly" by agreeing to the proposal with the Republican Left of Catalonia (ERC). "It cannot be that Oriol Junqueras is the one presenting the financing system that the other regions don't even know about," he lamented: "If there is a will to approve a system, you can't start by negotiating with separatism." However, he welcomed the fact that the First Vice President and Minister of Finance, María Jesús Montero, had been open to negotiating the measures against tax dumping that she announced last week and which had put the Prohens government on alert. "We will not accept any reduction of tax autonomy; it is a fundamental issue," he reiterated. "Citizens elected the elimination of inheritance and gift tax, and being forced to reinstate it is a red line." Nevertheless, he clarified, "if we can negotiate this, we will be on board." In the press conference following the meeting with regional leaders, Montero avoided specifying which taxes she would like to protect. But she denied that it necessarily had to be inheritance and gift tax: "Inheritance tax has never been mentioned; we will listen first."

Costa noted that, for now, the Spanish government's proposal "does not include any of the Islands' demands," even though, according to the ministry, the new model would provide the islands with an additional €412 million. "We hope to include them," he emphasized. A key issue for the Prohens government is the application of the principle of ordinality, which stipulates that each region receives funds from the central government in the same order in which it has contributed to the common fund.According to the latest published dataIn 2021 (according to calculations based on the financing system developed by the Generalitat), in terms of fiscal capacity, the Balearic Islands ranked second (after Madrid), contributing €3,248 per capita to the system. However, after the application of the financing model, the resources received by the Islands dropped them to ninth place: €2,910 per capita. The proposal put forward by the Spanish government does not include the application of this principle, but has only ensured that it would be maintained for Catalonia.

No ordinality

Montero clarified that "the ordinality contained in the financing model" presented by the Spanish government "is the same as that of the financing model we abandoned." "It's based on the same parameters," she said, although she admitted that the ordinality will be applied "for some regions, like Catalonia, and not for others." "The Spanish government's interest is not this, but rather reducing the differences in per capita funding," she specified. In this regard, she asserted that, if this reform is approved, the disparity in per capita funding between the best and worst funded regions will be reduced. Currently, it is €1,500, and with the new model, it would fall to €477, not taking into account Cantabria and Extremadura, which have their own weighting (raising the difference to €700). "The funding gap between regions is narrowing," she insisted.

Another issue that has come to light is that the weight of insularity in the calculation of the adjusted population (which determines the number of inhabitants of each community in relation to the needs and cost of the services they require) has decreased from 0.6 to 0.5, which has generated discontent in the Balearic Government. The Islands are also demanding that the floating population be taken into account; that is, those people who use public services even though they do not live in the territory, such as tourists or seasonal workers. Would Pedro Sánchez's government accept increasing the weighting of insularity and introducing this latter concept into the model? Montero expressed her willingness, but also put the ball in the PP's court. "If these issues are incorporated into the model, will the PP vote in favor?" she asked.

On the other hand, she pointed out that the Special Regime of the Balearic Islands (REB) already includes the insularity factor. "This government developed extensive legislation to recognize the insularity factor in the Islands, and the Balearic Islands receive extraordinary resources for this," he pointed out. He also rejected the possibility of incorporating the Special Economic Regime (REB) into the financing system. "We don't want it incorporated, nor do the Balearic Islands," he said. "But since this progressive government will be in power in 2028 (when the REB expires), it will surely be maintained."