ABSTRACT
Introduction Spain became a member of the European Monetary Union in 1999 and was under scrutiny with regard to its financial behavior before and after joining the EMU. After a relatively favorable development in terms of general government debts in the first years of the new millennium, the Global Financial Crisis revealed serious shortcomings in debt management on both levels of government and led to an intense political struggle to introduce effective consolidation policies. But issues surrounding subnational government (SNG) debts were nothing new, as they had already existed at the end of the 1990s. Spain is a tightly coupled fiscal regime but is more decentralized in terms of tax revenues than Germany or Austria (Blöchliger and Kantorowicz 2015: 5). The political powers of the federal government are very strong. The dominance of nationally oriented federal parties explains part of this strength. Safeguards are relatively unbalanced, and they increase the federal government’s room to maneuver in consolidation policies. Throughout the period we are observing (1990-2015), Spain was subject to a gradual process of authority migration of fiscal policies in favor of SNG. During the Global Financial Crisis, however, the Federal Government (FG) reversed this trend to some extent and strengthened its political powers vis-à-vis the SNG.
