S&P questions the viability of the new regional financing model in the face of Spain’s political fragmentation

S&P Global questions the viability of the new regional financing model proposed by the Government, which cedes greater management of income to the Autonomous Communities, due to political fragmentation. The rating agency considers that although the impact of the reform of the model would not be negative, given that it implies more resources for each region, in practice, moving it forward is quite a challenge given that some parliamentary groups that it needs to approve it have already expressed their opposition.

“This greater participation leaves the CCAA more exposed to the evolution of the economic cycle,” explained Alejandro Rodríguez Anglada, lead Analyst, Sovereign & International Public Finance of the company. During the annual press conference, Anglada lamented that Spain is losing the opportunity to take advantage of the favorable economic cycle to reduce the level of deficit, above all, in order to face the budgetary pressures that the aging of the population will entail or the greater expenses related to climatic events, such as DANA or the fires that devastated part of the country in summer.

In this context, he is confident that the expansion of the Spanish economy will remain above the eurozone average, although he detects signs of slowdown. Their forecast contemplates an advance of 2.1% at the national level for 2026, practically double what they expect for the eurozone. The percentage will be reduced to 1.8% in both 2027 and 2028. It must be taken into account that last year there was an improvement in GDP of almost 3%, so these data would show the economic slowdown.

The forecasts already include the impact of the tariff agreement reached between the European Union and the United States last July, which will subtract three tenths in the case of Spain, slightly below the eurozone, from which it could subtract between four and five tenths. Last September, the rating agency improved Spain’s rating to ‘A3’, which it had lost during the 2008 financial crisis, from ‘B3’ with a stable outlook, considering that the strength of activity is improving due to more balanced growth and deleveraging carried out by the private sector.

In parallel, he is confident that Germany could grow 1.1% this year from 0.3% in 2025, to advance 1.6% in the next two in the heat of the fiscal stimulus plan promoted by Chancellor Friedrich Merz. Italy, for its part, will see its GDP expand by 0.8%, three tenths more compared to the previous twelve months, while in France it will be two tenths, up to 1%.