The Socialist Party of Catalonia (PSC) and Republican Left of Catalonia (ERC) have unblocked two key issues, including a new orbital railway, to smooth the path for budget agreements in Catalonia. This railway aims to connect the second metropolitan ring without passing through Barcelona.
Both parties have also agreed to establish a commercial company to execute pending state investments in Catalonia. This comes after Junts per Catalunya (Junts) rejected a previous investment consortium proposal in the Congress of Deputies. The Catalan government plans to activate the budget approval process after the Andalusian elections on 17 May.
Orbital Railway Project Details
The orbital railway project seeks to connect Vilanova i la Geltrú and Mataró, passing through cities such as Vilafranca del Penedès and Granollers. This network, surrounding the metropolitan area, has been discussed for decades. An updated project from 2024 included 39 stations, 23 of which would be new.
Some sections, like the one from Vilafranca del Penedès to Martorell, are already built. However, new connections, such as between Granollers and Mataró, still need to be constructed. Sources familiar with the negotiations indicate the project could cost between €4 billion and €5 billion, with the Spanish state expected to cover a significant portion.
Oriol Junqueras, president of ERC, described the orbital train as an "essential response to the critical situation of the railway in our country" from Tàrrega. ERC supports this network as a new mobility model that prioritises trains over cars. The project is not new; the first tripartite government had proposed it previously.
Junqueras stated in Sabadell that "if we are to reach a budgetary agreement, there must be an explicit commitment to the orbital train." Sabadell is one of the cities that would be connected by this railway. The project also offers electoral advantages for ERC, allowing them to present a mobility proposal for the second metropolitan ring ahead of municipal elections, where they aim to gain influence in larger cities.
Investment Management Company
The second part of the budget agreement focuses on a replacement for the investment consortium, aiming to ensure the state fulfils its budgetary commitments. Unlike the orbital railway, this entity was part of the investiture agreement signed by the PSC and ERC in summer 2024.
ERC had registered a bill in Congress to regulate this body, but Junts voted against it, causing its failure. Both the Catalan government and ERC then decided to pursue a commercial company, also foreseen in ERC's bill, to execute state investments. This company can be established through an agreement between the Spanish government and the Generalitat, bypassing Congress.
The bill agreed upon by Socialists and Republicans stipulated that the company's share capital would be proportionally distributed between the two administrations, with the state holding the majority. This model is similar to that of the Rodalies mixed company. The original consortium was intended to set political guidelines for state investments in Catalonia, while the new company would have more executive powers. The statutes for this new company are still being drafted, and its specific functions remain to be formalised.
Financing and Future Steps
ERC had initially set the transfer of income tax collection as a red line for negotiating the 2026 budgets. However, the Spanish government's refusal to delegate this has led to a revised approach from the PSC and ERC. It is no longer a non-negotiable condition for the Republicans, who have prioritised other matters.
While the new minister, Arcadi España, maintains the refusal to transfer income tax to the Generalitat, he plans to advance the regional financing model. This model could provide an additional €4.7 billion for Catalonia. The Spanish government has included this in its 2027 regulatory plan.
The timeline includes activating bilateral contacts with regional councillors after the Andalusian elections to persuade them of the new model's benefits. Subsequently, around summer, the Fiscal and Financial Policy Council would be convened to approve it. The Spanish government holds a majority in this body and would not require additional votes.
However, the Spanish government wants to avoid being isolated with Catalonia, which would vote in favour, against other autonomous communities. With likely negative votes from PP-governed regions and Castilla-La Mancha, securing a 'yes' from Asturias (PSOE) has become a priority. Sources suggest positions have moved closer, though the ministry has not officially confirmed any agreement. The financing model would then proceed to Congress, where its viability would truly be tested. It would require approval from Junts, who have already expressed opposition, considering it insufficient. In the coming weeks, a partial write-off of the FLA debt, amounting to €17.104 billion for the Generalitat, is also expected to reach the Spanish parliament. This too will depend on Junts' vote, as they had requested a full debt write-off for the Generalitat.
