Regional finance: who raises the money, who receives it and whom the regions owe
The regions run health and education, and together with municipalities they spend half of all public money. They are funded by a 2009 system that shares money out unevenly, and they owe more than half of their debt to central government. Both questions are open on 29 November: the bill to write off part of that debt lapsed when parliament was dissolved.
Spain and Europe
Spain is one of the most decentralised countries in the EU, and its regions are among the most indebted.
In 2025, the regions spent the equivalent of 16.9% of GDP and municipalities 6.1%. Together they account for half of public spending, a share exceeded in the EU only by Denmark and similar to that of two federal countries, Belgium (50%) and Germany (47%). France (20%) and Italy (29%) are well below. The difference is who spends: in Denmark or Sweden, all of it is local government; in Spain, the regions, which are responsible for health, education and much of social services.
Regions and municipalities spend 51% of public money in Spain; in the EU, 35%
Spending by regional and local governments as a share of all government spending, 2025, in %. Spain ranks 2nd of 27 countries
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That decentralisation comes with debt. At the end of 2025, the regions owed 20.2% of GDP and municipalities 1.2%. Only Belgium's regional governments owe a similar share (20.4%); the German federal states owe 14.6%, and the Austrian ones 6.2%. Part of that debt is owed within the public sector itself: the regions owe more than half of it to central government, as shown in «Spain over time».
Regional and local government debt reaches 21.4% of GDP, second only to Belgium in the EU
Debt of regional and local governments, 2025, as % of GDP. EU average: 11.4%
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Spain from within
The regions do not owe the same, nor do they receive the same. Those with the least funding per inhabitant are among the most indebted, but that does not explain everything.
Four regions owe more than a quarter of their GDP: the Valencian Community, Murcia (30.8%), Castile-La Mancha and Catalonia (28.1% each). Madrid (12.3%) and Asturias (12.5%) are among those that owe least. The Basque Country (11.7%) and Navarre (8.4%) have a foral regime: they collect almost all their own taxes and pay central government an amount, the Basque «cupo» and the Navarrese contribution, for the services it still provides. That is why they are not part of the common system or of the funding comparisons that follow.
Debt equals 40.0% of GDP in the Valencian Community and 10.9% in the Canary Islands
Debt of each region as % of its GDP, June 2026. All regions: 20.4% of Spain's GDP
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The common-regime regions are funded mainly by ceded taxes: half of income tax and VAT, 58% of manufacturing excise duties and taxes such as wealth, inheritance and property transfer tax. Since what is collected depends on each territory's income, the system redistributes it. 75% goes into a Guarantee Fund, together with a central government contribution, which is shared out according to adjusted population; other funds are then added. In 2024, according to Fedea's calculations on the Finance Ministry settlement, the system gave the lower-income regions 24,647 million euros more than they collected: central government put in 13,238 million and Madrid, Catalonia and the Balearic Islands 11,409 million, as the only regions that paid in more than they received. Madrid contributed 8,681 million, 26% of what it collects.
With its own taxes, Madrid raises 135 per adjusted inhabitant and the Canary Islands 55; after redistribution, 100 and 108
Tax revenue and final funding per adjusted inhabitant, 2024. Index: average funding of the common-regime regions = 100
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The redistribution does not leave every region at the average. Afterwards, funding per adjusted inhabitant ranges from 92.0 in Murcia to 118.6 in Cantabria. Murcia, the Valencian Community, Andalusia and Castile-La Mancha remain below 95; Cantabria, La Rioja (112.2) and Extremadura (110.6) are at the top. According to Fedea, the Guarantee Fund greatly reduces the differences (the standard deviation of the index falls from 22.2 to 6.1 points), but the funds central government adds afterwards raise it to 7.5 and change the order of the regions.
Is it related to debt? Partly. Across the 15 common-regime regions, the relationship between funding and debt is negative (correlation coefficient of -0.57): the two worst funded, Murcia and the Valencian Community, are the two most indebted. But that does not explain everything. Catalonia, with funding slightly above average (102.6), shares third place in debt with Castile-La Mancha, and Andalusia, with the same funding as the latter (94.7), owes considerably less (18.2%). Debt also depends on how much each region spent, on the deficits built up during the crises and on each government's decisions, which this data does not separate.
Policy file: the 2009 funding system
- What it is. Law 22/2009 sets out how the 15 common-regime regions are funded: what share of national taxes is ceded to them and how it is shared out through the Guarantee Fund for Essential Public Services (75% of their tax revenue plus a central government contribution) and the Sufficiency, Cooperation and Competitiveness funds.
- Who and when. Parliament passed it in December 2009. It provides for its main elements to be reviewed every five years, but it has not been replaced: the 2024 settlement, paid in 2026, is still calculated under it.
- What should happen. Every region should have similar resources per unit of need to provide basic services (health, education and social services), whatever it collects.
- What we compare it with. With what each region raises from its own taxes before redistribution (chart D2), using Fedea's calculations on the official settlement.
What remains pending. In December 2025, the Council of Ministers sent Congress an organic bill for central government to take on 83,252 million euros of the common-regime regions' debt, with estimated interest savings of around 6,700 million, according to the Finance Ministry. That is a little more than two in every ten euros the regions owed in June 2026. In July 2026, the plenary rejected the amendments to the whole bill and it continued through parliament, but it had not completed its passage when Royal Decree 806/2026 dissolved parliament on 5 October. Under the Rules of Congress (article 207), dissolution means all pending business lapses: the next Congress will have to decide whether to take it up again. Neither a new funding system nor the debt write-off has been approved, so their effects cannot be assessed with data.
Spain over time
Regional debt soared after the 2008 crisis, and since 2012 the regions' main lender has been central government.
Until 2008, regional debt moved between 5.5% and 6.7% of GDP. With the crisis it tripled in five years, to 18.3% at the end of 2012, and since 2014 it has not fallen below 20%. As a share of GDP it has fallen since 2021, but in euros it keeps growing: from 303,992 million at the end of 2020 to 355,241 million in June 2026.
Regional debt went from 5.8% of GDP at the end of 2007 to 27.4% in March 2021; in June 2026, 20.4%
Debt of all regional governments, as % of GDP, quarterly since 1995
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In July 2012, with many regions struggling to borrow on the markets, central government created the Regional Liquidity Fund, a voluntary mechanism to lend them the money they needed to meet their maturities. Other central government mechanisms with the same aim have operated alongside it. Since then, much of the regions' new debt has been lent by central government: at the end of 2024 it was the creditor for 62.8% of it. In the first half of 2026, debt owed to banks, markets and other creditors grew by 16,500 million euros, while debt owed to central government fell.
Central government is the creditor for 57 of every 100 euros the regions owe
Regional debt by creditor, in billions of euros, quarterly, 2008 to June 2026
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For government as a whole, what a region owes central government is offset by what central government has lent: that is why total public debt, the figure compared across Europe, does not count it twice. If central government takes on part of that debt, regional debt falls, but debt for government as a whole does not change: what changes is who owes it.
What this data does not say. Debt measures what is owed, not whether the money was well spent or on what. Funding per adjusted inhabitant is a Fedea calculation at equal tax effort: it does not include what each region collects above or below that by raising or lowering its taxes, and Fedea presents the 2024 results as provisional. Adjusted population is the estimate of needs set by the law itself, and it is debated. The foral regions cannot be compared with the same measure. This data does not allow a region's debt to be attributed to its funding, its management or a particular government. And the European comparison adds up levels of government that do not have the same responsibilities in each country.
See also: The parliament in data: debt and deficit for government as a whole
Sources for the text
- Ley 22/2009, de 18 de diciembre, por la que se regula el sistema de financiación de las Comunidades Autónomas de régimen común
- A. de la Fuente (Fedea), La liquidación de 2024 del sistema de financiación de las comunidades autónomas de régimen común
- Finance Ministry: the Council of Ministers approves the debt write-off bill (9 December 2025)
- Europa Press (via LegalToday): Congress revives the bill to write off regional debt (29 September 2026)
- BOE (official gazette): Royal Decree 806/2026 dissolving Congress and the Senate and calling the election
- Rules of the Congress of Deputies (article 207: pending business lapses)
- BOE: Royal Decree-law 21/2012 on liquidity measures for public administrations (Regional Liquidity Fund)
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