Fiscal solidarity: Key benefits and pitfalls for Spain to lower their fiscal conflicts

Abstract

On December 6th, 1978 the Spanish population implemented its new constitution by means of a referendum and
finalised the transition process from the Franco regime to a modern democracy based on a parliamentary monarchy.
In the next 30 years the fiscal power and the expenditure autonomy of the 17 regions, called Comunidades
autónomas, increased constantly. But on the other hand, in some regions – mainly in the Catalan and the Basque
regions – the demand for complete sovereignty has also become stronger, while the central government is currently
unwilling to delegate any additional tax sovereignty to the regions. Therefore, this paper presents the German
equalization system among the states and concludes with some policy implications to reduce the ill feelings between
the central government and its respective regional counterparts in Spain.