The Catalan government prioritizes closing a budget agreement over the quota demanded by ERC.

The PSC government is approaching the start of the new political year with its sights set on the negotiations for the 2026 Catalan government budget, despite the demands of the independence movement regarding so-called singular financing. After a first year of the legislature marked by the recovery of institutionality in Catalonia—the "normality," in the words of the socialists themselves, lost during the independence process —an objective that is considered accomplished, the government headed by Salvador Illa intends to pass its first public accounts with the support of its investiture partners, the ERC (Republican Left) and the Comuns (Unins) .

This goal foundered late last year due to the delicate situation facing the Republicans, locked in internal elections in which Oriol Junqueras was vying for his leadership. With that out of the way, the search for an agreement with the forces to the left of the PSC seems easier, especially after twelve months in which the three parties have tested the art of negotiation on issues such as housing and infrastructure.

Special mention should be made of major projects such as the expansion of El Prat Airport, where Illa is currently working alone. In any case, the parties in the investiture bloc already know their respective margins of concession and have agreed on specific measures, as evidenced by the increase in the property tax negotiated between the Socialists and Comuns and the transfer of Rodalies, designed jointly with ERC. Added to this are the various agreements hammered out by the president in the bilateral commissions between the Generalitat and the State held throughout the first half of the year, which are welcomed by his partners.

But the cornerstone of the legislature, the unique financing model inspired by the Basque and Navarrese model, stands in the way. This week, Junqueras warned the Socialists that budget talks will not advance "until the new financing is resolved." The partial debt forgiveness of the Regional Liquidity Fund (FLA), scheduled for the first meeting of the Council of Ministers in September, has not softened the separatist leader. This represents a €17 billion write-off of Catalan liabilities, equivalent to 22% of the total debt incurred by the regional administration. The elimination of this burden will significantly alleviate the public finances of the Generalitat.

However, this agreement is not enough, according to Junqueras: "It is neither a necessary nor a sufficient step, because it is a commitment already made. It is an attempt to resolve an injustice, and it is important that it be approved in Congress as soon as possible," the leader warned last Wednesday in an interview on Catalunya Ràdio. These rhetorical demands contrast with the pro-independence party's apparent pragmatism regarding the timeline for the implementation of the Catalan-style quota, for which it is essential that the region achieve greater tax collection capacity.

At the end of July, the Catalan government presented the master plan for the Catalan Tax Agency (ATC), which postpones the assumption of the initial management functions of personal income tax until 2028 and, at all times, will work hand in hand with the state tax agency. Until that date arrives, the regional agency will limit itself to offering assistance to taxpayers, as it did in the last tax campaign. This approach disrupts the plan agreed upon before the investiture. This plan explicitly stipulated that the Generalitat would comprehensively manage income tax in 2026. Now, this horizon is indefinitely postponed, as only "networking" and "collaboration" between the ATC and the Treasury are proposed in 2028, the final year of Illa's term.

The Republicans have criticized this alteration of commitments, but without breaking the bank. On the one hand, they have downplayed the importance of the master plan, calling it a "technical document." On the other, they will fight for a bill in the Congress of Deputies that would allow Catalonia to collect and manage personal income tax. Added to this are Junqueras's warnings, including a possible consultation with the party's membership to decide whether the party should continue supporting the PSC. But at no point has there been even the slightest hint of a rupture. What the Republicans are seeking after the scandal surrounding the ATC plans is for the Catalan government to make some gesture to sell to its electorate, according to parliamentary sources.

The truth is that the Catalan Treasury 's strategy, revealed during the holidays, is a cold shower for the independence supporters' aspirations for maximum results. This rethinking is related, according to other sources, to criticism from tax inspectors and administrators. Although the Catalan government has not responded to the arguments put forward by organizations such as IHE, the Palau has taken note of the difficulties facing the Catalan Tax Agency in displacing the state Treasury in the region.

In fact, the ATC's own master plan acknowledges the inadequacy of human resources—it proposes hiring 1,100 people in 2026 and 2027 just to assist with personal income tax management; several waves of new hires have already been announced this year to structurally bolster the Catalan agency's staff—as well as technological and material resources. In addition, the legal difficulties also noted by inspectors.

Once again, the roadmap recognizes that for Catalonia to acquire full jurisdiction over personal income tax, a series of laws must be reformed—which is precisely why ERC is presenting its bill—namely: Organic Law 8/1980, of September 22, on the financing of the autonomous communities (known by the acronym LOFCA); Law 22/2009, of December 18, which regulates the financing system of the autonomous communities under the common regime; and Law 16/2010, of July 16, on the system for the transfer of taxes from the Spanish state to Catalonia.

This exercise in realism redirects the core of the political negotiations to the direction the PSC wants: the approval of public accounts that bury the budget extensions of recent years. This is also the demand of Catalan employers' and unions, who reject a third extension and call on the parties to exercise responsibility. The regional government itself wants to move past the ordeal of credit supplements that this year have provided some breathing space for the public coffers. The additional €4 billion added to the extended 2023 budget has been negotiated in parallel with the ERC and Comuns (Unions) and has forced the PSC to accept all kinds of demands from both organizations.

Up front, the Socialists have an advantage they will fully utilize in political contacts: global geopolitical uncertainty, against which the Generalitat must protect itself with updated figures in a timely manner. The order from the Ministry of Economy and Finance of July 16, which establishes the rules for preparing next year's budget, expressly mentions this reality: "The budget for 2026 is being prepared in a context of enormous global challenges and great international uncertainty, both due to the ongoing armed conflicts and the new tariff policy imposed by the United States, as well as the evolution of inflation and interest rates."

The budgetary guidelines report also recalls that the IMF forecasts advanced economies will grow by 1.4% in 2025 and 1.5% in 2026, with even more moderate growth in the eurozone: 0.8% in 2025 and 1.2% in 2026. However, the situation in both Spain and Catalonia will not be as negative. Regarding the Spanish economy, growth is expected to be 2.5% in 2025 and 1.8% in 2026, outperforming its neighboring countries. In Catalonia, GDP is expected to grow by 2.6% in 2025 and 2% in 2026, with domestic demand playing a significant role. Job creation, according to estimates, will continue, although at a slower pace compared to previous years.

On the other hand, the Economy order contemplates other eventualities: "In Catalonia, the 2026 budget is being prepared under a scenario of continuity and strict compliance with the spending rule. Even so, the improvements that may result from the absorption of the debt by the General State Administration, and the implementation of other political agreements—such as the new financing model (...)—will allow for an increase in the spending ceiling and the budgetary availability of the Generalitat." "During 2026, moreover, the implementation of the Recovery and Resilience Facility funds will have to be intensified to meet the planned milestones and objectives, and the implementation of these targeted funds, which are not included in the initial budget but are incorporated during the budget execution phase, will have to be prioritized," it adds. The restoration of fiscal orthodoxy is another element that the PSC will use to try to convince its allies of the need to approve the budget. However, at this point, it is still unknown how the deficit will be distributed among public administrations in the State in the next fiscal year.

The department headed by Alícia Romero expects to have all the accounting and documentation ready to prepare the new public accounts by October 10th. The budget draft could then begin processing, and within two months, it will be ready for publication in the Diari Oficial de la Generalitat de Catalunya (DOGC) before the end of the year.