Trend reversal for the first time in ten years: At the end of 2021, municipal debt experienced its first increase since the Great Recession. The 0.54% increase has pushed the liabilities of city councils, provincial councils, councils and smaller corporations to 22,068 million. The fluctuation, while small and far from the maximum reached during the financial crisis, has turned the tide of administrations that have been exemplary in terms of budget balancing. Since 2012 they had reduced their debt by running a surplus. In fact, 4,812 of the 8,131 municipalities in Spain ended 2021 debt-free despite the pandemic. In the map below you can see the debt data and the change over the last year by parish according to the data published by the Treasury.
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The councilors’ virtuosity is actually the result of forced adjustment after the severe financial crisis of 2012, when the Budget and Financial Stability Act came into force. The EU forced Spain to reduce its bulkiness Red numbers, the introduction of a corset that would keep spending under control. Added to this is the structure of the municipal financing system, since the taxes levied by the municipalities (IBI) are less dependent on the economy. The result is reflected in the statistics: Since then, local companies have reduced their debt by an average of 8% per year.
However, the arrival of the pandemic has prompted greater efforts and, most importantly, has resulted in Brussels agreeing to an escape clause allowing fiscal rules to be frozen. Municipalities have also benefited from this suspension, which after a battle with the Treasury managed to relax the rule requiring them to set a ceiling above which they can’t spend.
The list of the most heavily indebted municipalities by population has remained unchanged. They are in turn carried out by smaller towns. This indicator is more reliable for local government and the health of public finances compared to total debt, which is always higher in larger cities for a more than logical reason: the larger the size, the larger the budgets managed by their mayors. .
The small town of Vallada, despite a slight decline in its red figures, once again tops the list of municipalities with the highest per capita debt. Each of its 3,092 residents owed a whopping 9,121 euros as of December 31, 2021. That figure is down just €7 from last year after the small Valencian town’s debt increased by more than 30% since 2019. Behind this bulging debt Red numbers there is a thwarted dream: to create an inland sea with a nautical park in this inland city, which is 70 kilometers from the nearest port. The project never materialized, nor did successive plans to replace it, although the municipality had already acquired 1.3 million square meters of land.
Navajas (Castellón) is also again the second most indebted municipality in Spain per inhabitant, although it has reduced its debt by 6% in the last year: each of its neighbors has accumulated debts of 7,691 euros at the end of 2021. This municipality of 750 inhabitants, which ranked first on the list before the outbreak of the pandemic, fattened its budget gap during the more than 20-year tenure of José Vicente Torres (PP), who was in charge of the consistory until 2015.
The podium is closed by Los Barrios (Cádiz), which has dethroned Moraleja de Enmedio (Madrid) as the third municipality with the highest debt per inhabitant in Spain. Each inhabitant of this city owes 7,319 euros, 7% more than last year.
However, the small municipalities of Huévar de Aljarafe (Seville), Plasenzuela (Cáceres) and Almohaja (Teruel) are the cities that have increased their debt per capita the most in the last year and along with Barbate since the pandemic. Erste increased its debt by more than €5,500 in 2021 compared to 2020, ranking fifth on the list of the most indebted cities. The others increased their debts by almost 3,000 euros per capita. At the other end is the town of Grajera. This municipality of just 245 people reduced its debt per capita the most in 2021, from €4,630 to zero.
Looking at medium-sized and large cities, Navalcarnero, with 25,000 to 50,000 inhabitants, is the municipality with the highest per capita debt, 3,729 euros per inhabitant. Totana (Murcia) or Puerto Real and Arcos de la Frontera, based in Cadiz, also stand out in this group. Among the largest cities with more than 100,000 inhabitants, Jaén and Jerez de la Frontera stand out, with debts of more than 4,000 euros per inhabitant.
In absolute terms, Madrid is the municipality with the largest deficit with 1,679 million euros. Despite the high number, the capital has carried out an intensive restructuring of its accounts, which has enabled it to reduce its liabilities from the more than 7,000 million it owed in 2012 – in 2021 it also has the gap of 270 million reduced. Jerez de la Frontera in Cádiz follows on the list with a negative balance of 918 million – 118 more than in 2020 – which corresponds to 4,312 euros per inhabitant, and Barcelona with 817 million, 16 million more than the previous year.