The government's Fiscal and Financial Policy Council meeting on Tuesday led, in practice, to the granting of urgent assistance to the regions that are being asphyxiated by their very high debt levels and lack of liquidity, but with no clear corresponding commitments on the part of the regional governments.
On the one hand, Finance Minister Cristóbal Montoro has thrown out a financial life jacket in the form of a credit line from the Official Credit Institute (without specifying how much, at what cost or with what kind of conditions), an increase from five to 10 years in the repayment period for the 31 billion euros in overpayments received by the regions, and an advance of eight billion euros in transfers due in July that will be disbursed this month. The Valencia region, for example, will be urgently sent 420 million euros in order to pay its suppliers.
On the other hand, the government has threatened reprobate regions with strict control over their accounts in the case of excessive deficits, with Montoro even going so far as to mention the possibility of pursuing public sector managers on criminal charges should they fail to balance their budgets. This suggestion was met with widespread incredulity given the unviability of such a measure.
The economic concessions of the minister are all about cash. They will most likely have a positive effect (assuming that the funds are used to pay suppliers, and not to finance airports without planes or bizarre monuments, as has been the case in Castellón). But an exact assessment of benefits and costs is lacking. In exchange for the promise of financial salvation, citizens were hoping for a firm commitment, with a clear system of sanctions, to bring an end to the chaos surrounding public finances. There was nothing of the sort to be seen, although the Finance Ministry is now suggesting the possibility of withholding transfers to the regions with excessive deficits.
Of course, the state can intervene in the finances of a region that is not complying via the Fiscal Policy Council; what's more, it should do so, because an unjustified deficit on the part of a region compromises the entire national debt.
As far as the threat of criminal prosecution goes, this seems to be a very impractical idea. In contrast to Montoro's argument, spending more than what you have is not a crime. Nor can there be charges for such a crime if it is not defined by the legal system. It seems ridiculous to confuse poor economic management with criminal behavior. The thunderous threats of the minister are empty ones - nothing more than an attempt to appeal to the public by adopting a severity that cannot be justified by the situation.
There are other problems. A solution must be found for the bankruptcy of Valencia, which was perpetrated by figures from the Popular Party who have been tainted with dishonor, while Catalonia must also be saved, given that its liquidity problems are putting Spanish debt at risk. But Montoro's imprecise measures are nothing more than a patch. A new political and financial framework is needed to avoid scandals like that of Valencia.