Catalan Finance Minister accuses Rajoy of discrediting Spain’s regional governments

Barcelona (ACN).- The European Commission has sent a warning to Spain regarding the budget for 2015 and the possibility of meeting the global deficit target of 4.2%. On Friday, the European Commissioner for Economic Affairs, Pierre Moscovici, asked the Spanish Government to adopt the necessary measures to guarantee that the 2015 budget will respect the Stability and Growth Pact. The Spanish Minister for the Economy, Luís de Guindos, answered back and affirmed that no additional measures will be adopted since the already-allocated budget for 2015 and the forecasted economic growth “are enough” to meet the 4.2% deficit objective. The Commission also demanded that the Spanish Government put “more pressure” on the Autonomous Communities that will not meet their deficit target in 2014, which is likely to be the case of Catalonia Brussels directly asked for the implementation of “corrective measures” in these cases, without pointing out that regional bodies have undertaken the largest budget adjustment in Spain over the last few years. In addition, the Commission did not make any comment on whether the deficit targets that Madrid has unilaterally imposed on the regional governments are fair or realistic, taking into account that regional governments exclusively manage and fund the basic services of the Welfare State such as healthcare, education and social care. In fact, the Catalan Finance Minister, Andreu Mas-Colell, accused the Spanish Government of putting the blame on the Autonomous Communities and of “discrediting” them at an international level and also in the eyes of citizens, despite they having carried out the widest budget adjustment and deficit reduction in the whole of Spain. Mas-Colell accused the Spanish Government of “playing with fire” with a “perverse” inter-territorial fiscal scheme and the deficit targets. One the one hand they are imposing “strict deficit targets” and funding the Autonomous Communities with a “perverse system” and, on the other, the Spanish Government “blames the autonomous Communities for not meeting such deficit targets”, despite regional governments having undertaken “the maximum efforts” in Spain to keep public spending under control.

The Spanish Government has been developing this strategy for the last 3 years, in order to recentralise powers by obliging the Autonomous Communities to reduce public spending. The services the regional governments could no longer afford were lost or assumed by the Spanish Executive, which has not carried out an equivalent spending reduction despite it directly managing more than 50% of Spain’s total public money. Meanwhile, the Autonomous Communities have moved from managing almost 37% of Spain’s public money to a 33% of it, with which they have to pay for public hospitals, drug prescriptions, schools, universities and social services, among many other costs. 

In addition, the Catalan Government manages  the police and prisons, as well as all the policies for the promotion of the Catalan language, and therefore it requires a larger amount of public money. In fact, the Catalan Government has already reduced public spending by 22% between 2011 and 2013, a reduction equivalent to €4 billion. In 2014, spending levels were kept as otherwise “the social cohesion would be at risk”, stated Mas-Colell a year ago. The Spanish Government is far from having undertaken a similar spending reduction. Furthermore, the Spanish Prime Minister, Mariano Rajoy, has increased some taxes, such as the VAT, whose additional revenue has not been shared with the Autonomous Communities and, on top of this, regional government have not had to pay a higher VAT. A year ago, Mas-Colell already talked about the Spanish Government’s “disloyalty”, which is even higher since Rajoy refuses to pay Catalonia pending debts of several funds and money for infrastructure, despite those laws that state the contrary. The European Commission did not mention these elements in its analysis.

On top of this, the Catalan Government is significantly under-budgeted in comparison with other Autonomous Communities in Spain, since 43% of taxes paid by Catalan citizens are spent outside Catalonia following the Spanish Government’s non-transparent fiscal redistribution scheme. The Spanish Government raises the majority of taxes and partially funds the Autonomous Communities, which have quite limited fiscal capacities. In fact, studies show that Catalans have been giving away around €16.5 billion each year for least for the last 25 years, an amount that is equivalent to giving away on an annual basis, an average of 8.1% of Catalonia’s GDP. This excess of imposed solidarity with poorer regions shows that Catalonia has less public money per inhabitant than poorer regions, resulting in worse public services and long delays in building basic infrastructure. In particular, this affects Catalonia’s working and middle classes, as well as those in need, and the entire economy.

In addition, the Spanish Government unilaterally imposes extremely strict deficit targets that are not equivalent to the spending responsibilities of regional governments. Furthermore, the Spanish Government does not honour debts and it refuses to review the current inter-territorial fiscal scheme, despite the current model having expired on January 1, 2014. Last week, the Spanish Government announced it would not review the current model until at least 2016. 

The Spanish central authorities are therefore using the reduction of public spending and the control of the public deficit to recentralise powers, while it is putting the Catalan Government under a severe financial stress that affects basic public services. This global strategy cannot be dissociated from the current debate on Catalonia’s independence from Spain. By discrediting the Catalan Government and restricting its funds, the Spanish authorities reduce Barcelona’s room for manoeuvre and hope to reduce citizen trust in the Catalan public institutions, in order to ultimately reduce the support for independence.

The European Commission does not seem to incorporate all these elements into its analysis, which simply petitions for more pressure from the Autonomous Communities to reduce the public deficit and introduce sanctions. By doing this, the European Commission is supporting the recentralisation of powers in Spain, going against Catalonia’s self-government and the decentralisation logics of the Spanish Constitution.