Gov Accountability

Economic freedom index reveals path to prosperity for Spain's cities

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Thirty-one cities in Spain have achieved “acceptable” scores in Economic Freedom, according to a new index by the Madrid-based Fundación para el Avance de la Libertad, also known as Fundalib (Foundation for the Advancement of Liberty). The Municipal Index of Economic Freedom for Spain’s Cities evaluates Spain’s major cities and combines weighted indices to determine their overall economic freedom. The index has revealed areas where economic reforms are desperately needed and has paved the way for policy changes that are opening up new opportunities for individuals and businesses in Spain.

While the results point to a lot of work that still needs to be done, there has been great improvement since the initial study, which was published in 2018. Only 19 cities were ranked as “acceptable” (50 and over on a 100 point scale), last year, meaning that in only 12 months, many of Spain’s major cities were able to pass crucial reforms that propelled them into a state of significantly higher economic freedom.

The index, which was published in April, is already influencing policy discussions, with nine major cities having announced or implemented policy reforms.

Madrid mayor José Luis Martínez-Almeida has announced a slew of reforms, including a plan to reduce municipal debt, while reducing local taxes and parking fines.

  • In Zaragoza, the City Councilor for Taxation and Interior, Maria Navarro, laid out a plan to help pay off the city’s debt, followed by a 2.1 percent reduction in municipal property taxes.
  • Policymakers in Cordoba have entered into negotiations to reduce local taxes.
  • The government in Oviedo has frozen the majority of taxes on businesses, as well as reduced municipal property taxes by 3.5 percent.
  • Castellon mayor Amaparo Blanco has pledged to repay €8.4 million of the city’s debt.
  • The city council of Alicante, a historic port city, has confirmed that €4.2 million of the city’s debt is projected to be paid off by the end of their term.
  • The government of Málaga has vowed to reduce municipal debt by €50 million.

The majority of the policy reforms pursued by these major cities adhere to the recommendations made in the Municipal Index. According to Juan Pina, secretary-general of Fundalib, the index was designed to be more reform-oriented so it could help guide economic change in Spain’s cities.

The 100 point scale takes four major factors into account:

  • The overall economic performance of a city (which factors in the city’s budget, debt, spending on subsidies, and business environment) for 30 percent of the score.
  • The burden of the municipal workforce (which factors in the number of public employees and policemen, their salaries, and the costs of bureaucracy) for 20 percent of the score.
  • Economic interventionism (which factors in the extent to which the municipality involves itself and distorts market results) for 20 percent of the score.
  • Tax pressure (which factors the pressure of taxation on businesses and taxpayers) for 30 percent of the score.

Fundación para el Avance de la Libertad received a grant from Atlas Network to help fund the second edition of the Municipal Index For Economic Freedom For Spain’s Cities.