A new fiscal model proposed by Spain’s finance minister for its regional governments has faced a heavy backlash from regional leaders, who accuse the central government of toying with public finances to win political favours as it struggles to hold its fragile coalition together.

The Socialists, who head a minority coalition government, struck a bilateral deal with Catalonia at the behest of separatist party ERC that guarantees the region will receive the same amount in services as it pays in taxes, while other governments receive varying amounts.

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That has infuriated the country’s other regions, with some threatening to take the state to court for, they claim, contravening the constitutional principle that no territory should be given a financial advantage over another by the central government.

Economists and ratings agencies have also expressed concern over an additional 21 billion euros promised in the model by the state to regional governments, worsening Spain’s fiscal position when it is already buckling under the strain of higher pensions and pressure to boost defence spending.

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Spain’s central budget is still being rolled over this year from its 2023 version after it failed last November to secure backing from the conservative opposition People’s Party, hard-right Vox and hard-left Podemos for a new proposal.

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