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The Spanish Government, led by Socialist Prime Minister Pedro Sánchez, is set to pardon 17 billon euro of Catalonia’s debt.
The announcement came after the separatist left party, Esquerra Republicana (ERC), and its national leader Oriol Junqueras, negotiated an agreement with the Socialist Party, where the National Government would condone 22% of the debt of Catalonia’s regional government.
With this promise, the Government of Sánchez fulfills one more of its obligations with the Catalan separatists that were part of his support as part of its 2023 agreement that secured Sánchez’s bid for Prime Minister.
According to Junqueras—who was condemned and imprisoned for his involvement in the 2017 attempted coup in Catalonia—the agreement with the Socialists “went beyond” what was originally agreed upon, which was 20%.
The regional Government of Catalonia, currently led by the Socialist Party, celebrated the agreement and announced that it would reduce the interest they owed by 1.500 euro.
The agreement, however, did not please the whole Catalan separatist bloc. The fugitive and exiled former president of the Catalonia region, Carles Puigdemont, said all of Catalonia’s debt should be condoned.
Puigdemont also said that the financing system for Catalonia is “unjust and insufficient”.
“The Catalan administration should be freed from all this problem,” he added. However, Puigdemont acknowledged that for a part of the debt to be condoned “is better than nothing.”
Amid criticisms of discrimination among Spain Autonomous Communities, Pedro Sánchez’s government announced that they would apply a “common regime” of debt pardoning of more than 80 billion euros for the rest of Spain’s regions.
Sánchez’s move to pardon Catalonia’s debt elicited critical reactions from most Autonomous Communities, which are currently ruled by the opposition’s centre-right Partido Popular (PP).
The leader of the Madrid PP and the current President of the Madrid Auntonomous Community, Isabel Díaz Ayuso, argued in the Madrid Assembly that Sánchez’s pardoning of Catalonia’s debt would mean “each citizen of Madrid would have to pay 500 more euros.”
Isabel Díaz Ayuso warned that the debt Catalonia owes would be split among all Spaniards.
“We are being treated like idiots,” said Ayuso. “We were told the amnesty was necessary for coexistence and now we have to assume the Catalans’ debt.”
As part of the Sánchez Prime Minister bid agreement with the Catalan separatists, the Socialists—in addition to condoning Catalonia’s debt—agreed to pass an amnesty law to pardon several leaders and regular citizens involved in the seditious events of October 2017.
Ayuso has vowed to take the issue to Court, arguing that it would harm the residents of the Madrid region.
The Conservative party VOX said in the Catalan Parliament said the Socialist Party “pulled down its trousers” and showed a “lack of solidarity” when it decided to pardon Catalonia’s debt.
Its national leader, Santiago Abascal, criticised the decision and called it “an agreement between looters and the corrupt.” According to calculations made by VOX, condoning the debt of Catalonia would cost each Spanish contributor some 800 euro.
Much of the heat is being levied against Deputy Prime Minister and Minister for Finance, María Jesús Montero, who is set to become the Socialist candidate for the presidency of Andalucia in the upcoming regional elections.
Her plan to pardon the debts of all of Spain’s Autonomous Communities has been met with skepticism from several private actors, including Moody’s.
The international firm warned that “the debt cancellation will not directly affect sovereign debt ratios because the debt of the regions is already accounted for as part of the public administrations’ debt ‘stock,’ but it raises some concerns about moral hazard.”
The firm Standard & Poor’s said that the proposed policy would “reduce regional incentives”.