The Catalan government is set to approve its 2026 budget bill this Friday. However, a major political standoff leaves the legislation without enough parliamentary support. The pro-independence Republican Left of Catalonia (ERC) is withholding its crucial votes, demanding firm guarantees on the full transfer of income tax collection powers to the region.

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President Salvador Illa, leader of the Socialists’ Party of Catalonia (PSC), is pressing ahead in a high-stakes move designed to pressure ERC into a deal. In an extraordinary meeting of the executive council on Friday, the government will officially approve the budget draft, which has the backing of the Comuns party but falls short of a majority.

“There’s no turning back. Catalonia needs a budget,” Illa stated firmly on Monday, signalling his intention to advance the process with or without ERC’s initial blessing.

A Deepening Fiscal Dispute

At the heart of the impasse is a key pledge from Illa’s investiture agreement: amending Spanish state law to allow the Catalan Tax Agency (ATC) to collect 100% of the personal income tax (IRPF) generated in Catalonia. While Illa has publicly reiterated his “total commitment” to this goal, ERC leaders claim this assurance is insufficient without concrete action from the PSC’s national counterpart, the Spanish Socialist Workers’ Party (PSOE), led by Prime Minister Pedro Sánchez.

According to reports in Ara Cat, the situation escalated after a private meeting between Sánchez and ERC president Oriol Junqueras. Sánchez reportedly told Junqueras that now is not the time to advance on the tax transfer, citing upcoming regional elections in Andalusia. The concern is that political opponents could exploit such a concession to Catalonia, using it to attack the PSOE’s candidate and current Spanish Finance Minister, María Jesús Montero.

This has left the Generalitat in a precarious position. The PSC says ERC is not considering the delicate national political context, while ERC argues that Illa is failing to use his influence to deliver on a core promise.

“You can imagine what our vote will be,” ERC’s secretary-general, Elisenda Alamany, warned at a press conference on Monday. She accused the PSC of not having “done their homework” to convince the national government in Madrid. “It’s your responsibility to call Mr. Sánchez, who is from your party,” she added.

In response, PSC spokesperson Lluïsa Moret said her party would not “pressure” the PSOE. “Like everything in life, you have to look at when the opportune moment is,” she commented, while acknowledging the “risk” of approving the budget without securing ERC’s support first.

Economic and Social Pressure Mounts

To amplify pressure on ERC, President Illa’s government has signed an agreement with Catalonia’s main unions and employers’ associations. The deal incorporates 86 measures into the proposed budget, including a €4.4 billion allocation for the National Pact for Industry, reinforced funding for dual vocational training, and a 3% increase in the Catalan sufficiency income index (IRSC), a key social welfare benchmark.

The new budget is critical for funding public services. This is especially true given that over 20,000 people recently signed a petition demanding urgent health funding. It would also allocate funds for initiatives such as the government’s proposal for €22 million to improve pay for educational support staff.

Business leaders have urged politicians to find a solution. Josep Sánchez-Llibre of the Foment del Treball employers’ group warned that failure to pass a new budget could jeopardise up to €5 billion in investments. Camil Ros of the UGT union urged parties to set aside “tacticism” and finally replace the outdated 2023 budget, which is still in effect.

An Uncertain Path Forward

By approving the budget in the cabinet before securing a parliamentary majority, Illa’s government limits the scope for future negotiations on specific departmental spending. The bill will now begin a roughly five-week legislative process in the Catalan Parliament.

The move is a calculated risk. The previous Catalan administration, led by Pere Aragonès of ERC, saw its own budget fail in parliament due to a lack of support, a move which ultimately triggered an early election. With the political lines drawn, the fate of the 2026 budget, and the stability of the Catalan government, now hangs on resolving the complex and politically charged issue of fiscal autonomy.