Tensions are rising in Catalonia over the approval of the regional budget. The issue of transferring powers to manage the personal income tax (IRPF) has become a major obstacle to reaching an agreement between PSC and ERC. Failure to find a compromise could have serious consequences for funding social programs and for the economic stability of the region.
As El Pais reports, negotiations between PSC and ERC are moving quickly, but Spain’s central government has shown no willingness to concede on tax authority. This step is what ERC requires to support the budget. Meanwhile, representatives of Pedro Sánchez’s government are not making new proposals, even though the decision is entirely up to Madrid.
Negotiations at a standstill
In recent days, PSC and ERC representatives have been holding intensive meetings in the government building of Catalonia. Despite regular talks, both sides’ positions remain unchanged. The Catalan government is increasing pressure on ERC, citing the risks to the region’s economy from global instability and a possible budget shortfall.
ERC, in turn, insists on clear guarantees regarding expanded tax autonomy. To transfer powers over IRPF collection, several laws must be amended at once, including LOFCA and regulations on regional financing. However, according to El Pais, even the next meeting of the Financial and Tax Policy Council cannot be convened before Friday due to regulatory restrictions.
Possible scenarios
Ahead of Friday’s vote on budget amendments, four possible scenarios are being considered. The first is that ERC withdraws its amendment, giving more time for negotiations but with no guarantees of tax reform. The second is that the Catalan government retracts the draft budget and returns to it later, but both sides have ruled out this scenario.
If no compromise is reached, two other outcomes are possible: early elections or continuing with last year’s budget. For Salvador Illa’s government, both options carry risks—from losing control over the process to having to seek support from other political groups. As El Pais notes, the situation is further complicated because new elections could change the balance of independent parties and increase the influence of radical forces.
The role of the central government
The central government of Spain is taking a wait-and-see approach and is not publicly intervening in the negotiations between the PSC and ERC. Although the Ministry of Finance must ultimately approve the transfer of tax powers, officials are limiting themselves to general statements about the need to continue dialogue.
At the same time, Madrid’s lack of a clear position adds further uncertainty for Catalonia. According to russpain.com, similar situations have already led to prolonged crises in other autonomous regions when the redistribution of tax revenues became a matter of political negotiation.
Context and consequences
In recent years, Catalonia has repeatedly faced difficulties in passing its budget. In 2023, the region had to operate under temporary financial rules due to a lack of support from key parties. Such situations have delayed infrastructure projects and social policies. Other Spanish regions have experienced similar disputes over tax autonomy, often resulting in political crises and snap elections. The issue of redistributing tax revenues remains one of the most contentious in relations between Madrid and the regions.
