The financial and political crisis of Spanish federalism: transformation or erosion?

While some of the literature on the Spanish system had repeatedly pointed out several centralizing trends and mechanisms within the territorial model, not much of it had been able to show convincingly any formal shift of authority towards the centre in the last decades against the backdrop of clear decentralizing tendencies in powers and resources and increasing regional policy-discretion for most sectors of public activity. Also in the wake of the first stage of the 2008–9 financial crisis, the stimulus phase, little formal change and shift of authority was observed, since the central government had plenty of constitutionally entrenched financial and regulatory powers to deal with it and regions largely supported centrally managed stimulus measures. During the second phase of the crisis, however, we are increasingly observing that the policies of austerity have exposed the system to centralizing pressures that have been translated into some formal constitutional and statutory changes that are already having an impact on the autonomy of the autonomous communities (ACs) and on the type of distributive conflicts, which in turn has exacerbated some centrifugal tensions such as secessionism in Catalonia. Conflict between counter-cyclical measures of some regions and the centre has ensued, and demands for fiscal federalism reform increased. Through the combined effect of the international credit markets, the EU authorities’ demands for fiscal consolidation and the centralization measures of the central government in response, Spanish regions seem to be losing most of their financial autonomy and discretion and intergovernmental, fiscal and other relations seem to be transforming into a less cooperative model. Without changing the constitutional division of powers, the centralization of the system implied by these developments has affected the autonomy of elected regional governments and their accountability before their citizens, as well as the stability and legitimacy of the whole system. The chapter describes all these effects of the crisis, seeking to contribute to the growing comparative discussion on the effect of the current crisis on federal systems and fiscal federalism, their stability and fiscal sustainability and at the same time to contribute to the ongoing debate on the workings, effectiveness and the future of the Spanish Estado Auton—mico. Although Spanish federalism has been faced with several accommodation and efficiency challenges before, currently it has to deal with a combination of fiscal and political problems thus far unknown to it: stagnation and fiscal crisis, alongside increasing economic divergence among regions and the strengthening of traditional centrifugal forces in some ACs.