Catalonia plans to request 12,662 million from the Liquidity Fund in 2022 – CVBJ
12/25/2021 at 8:30 p.m. CET
The Generalitat plans to borrow from Autonomous liquidity fund (FLA) a total of € 12,662 million in 2022, an amount slightly less than the 13,014 million requested in 2021.
Sources from the Generalitat’s Ministry of the Economy assured that this was the amount expected to be requested next year.
A total of 11,138 million euros of this amount will be used to deal with debt repayment, mainly to cover repayment of loans from previous years of the FLA and other government-authorized liquidity mechanisms, but also to meet other debt maturities.
The State launched these instruments at the end of 2012, in the midst of the financial crisis, to help local authorities to have liquidity at a time when the Financial markets they were closed to the autonomies’ debt problems.
From the outset, those the loans were granted for ten years, with the first two of grace, although from January 2020 they are granted at twelve years, with four of grace.
Thus, the repayment of loans linked to these liquidity mechanisms weighs more and more on the amounts requested by Catalonia from the FLA, given that they will accumulate from year to year yields on debt contracted since 2012.
Joined the FLA except in 2019 and 2020
The FLA, created in 2012, in the midst of the financial crisis, will be in effect for a decade next year. During all these years, Catalonia has been subject to this liquidity provision mechanism with the exception of two years, in 2019 and 2020, when it was able to join the Financial Facility Fund (FFF).
Catalonia was able to access this other mechanism, which involves more lax controls than the FLA, having fulfilled the previous years, that is to say in 2018 and 2019, with the three budgetary stability objectives set by law ( deficit, debt and expenditure rule).
According to Treasury data, by the end of 2021, Catalonia will have received a total of 13,552.8 million euros from the FLA, which represents 43.49% of the total funds distributed among the communities adhering to this mechanism.
Idea of returning to the markets
Despite the dependence on the FLA, the Generalitat has always wanted to return to the financial markets, and this is what both the former Minister of the Economy, Pere Aragonès, current president of the Generalitat, and the current Minister of the Economy, Jaume Giró.
The crisis created by covid-19 has forced the Generalitat’s plans to issue debt to be postponed and thus to return to the financial markets.
However, last July, the agency Fitch credit rating the Generalitat’s rating was upgraded by two notches, from BB to BBB-, with a stable outlook.
Thus, this agency stopped considering the Generalitat’s debt as speculative grade, that is to say as a junk bond, and placed it, a decade later, in investment grade.
Beyond this interest in demonstrating financial sovereignty in the face of the markets, the Generalitat continues to demand that the State set up a covid fund also in 2022, to continue to cover the extraordinary expenses generated by the pandemic.
And it is that this state fund has served to greatly reduce the extraordinary bill created by the pandemic, both in 2020 and 2021, and the Generalitat affirms that the covid-19 and the crisis it triggered will continue to ‘be active next year and you must have extraordinary resources to cover that additional expense.