The Government will assume the payment of the interest that the local entities pay to the financial entities for having deposited their remnants, so that the municipalities that lend these savings to the Ministry of Finance will benefit from an effective interest rate of 0% and may reach save up to 70 million euros annually.
Casado prohibits the PP municipalities from giving their remnants to the State in exchange for aid against the pandemic
As reported by the Ministry of María Jesús Montero in a press release, collected by Europa Press, the BOE has published this Tuesday the conditions of the voluntary loan of the remnants that was agreed with the Spanish Federation of Municipalities and Provinces (FEMP).
In this way, the local entities that benefit from this budget fund of 5,000 million will also have the possibility of opting for a 15-year repayment and thus obtain an interest rate of 0.05%.
Currently, the local entities that have these remnants pay interest to the banks for having this money deposited there. However, with this formula, the Treasury wants the Central Administration to bear this cost.
The decree law has to be validated in Congress
Last Tuesday, the Council of Ministers transformed the controversial agreement with the FEMP into a decree law that will have to be repealed or validated in the Congress of Deputies. As defended by the Ministry of María Jesús Montero, this formula published this morning allows local entities to increase their spending capacity without incurring public deficits, complying with the Budget Stability Law and the Constitution.
The agreement between the Treasury and the municipal group contemplates that the annual interest rate determined for formalized loans “may not exceed the equivalent cost of financing the State debt.”
This legal condition results in a negative interest rate for the ten-year loan. The resolution approved this morning in the BOE establishes that the loan with annual linear amortization over ten years will carry an interest rate of -0.192%, more favorable than the one that local entities must pay today for having their remnants in the banks. In any case, the Treasury undertakes to assume the financial cost of the operation in such a way that the 10-year repayment entails an interest rate of 0%.
Regarding distribution, the Government will transfer to local entities a maximum of 2,000 million in this year and 3,000 million in 2021. The money will be released in two years to meet the request of the FEMP to give local entities sufficient time to run the 5,000 million.
The town councils and the rest of the local entities have until September 15 to transfer to the Ministry their firm, binding and inalienable commitment to transfer their remaining treasury.
The PSOE, the only party in favor of the initial agreement
The initial pact was approved with the quality vote of the president of the group, Abel Caballero, after the votes ended in a tie. Citizens, Popular Party and JuntsxCat rejected the agreement after considering that it did not pay attention to municipalities without remnantsUnited We can abstain and, finally, the PSOE approved the measure en bloc with the final vote of the socialist mayor of Vigo.
The leadership of the Popular Party has already warned that its municipalities will not cede remnants to the State and this Tuesday the mayor of Barcelona, Ada Colau, He has joined in his refusal after calling the measure “centralist and anti-municipal”.