The Catalan Government extends the 2012 budget for the whole of 2013 due to the low deficit target

Barcelona (ACN).- The President of the Catalan Government, Artur Mas, officially announced on Tuesday that the Cabinet has decided to extend last year’s budget for the whole of 2013, since the 1.58% deficit target imposed by the Spanish Executive is too low and arrives too late. “We want to make the Spanish Government understand that beyond some limits, a serious and reasonable budget cannot be drafted”, emphasised the Catalan President. However, he explained that the budget extension guidelines will meet the 1.58% level because, if they were not to meet it, the Catalan Government would not have the money to pay for the additional spending. Furthermore, Mas announced they will take the “unfair and illegal split” of the deficit targets to court for 2013 and 2014 among the different government levels, since they consider the Spanish Government has not done it “in a proportional way”, as it keeps most of the deficit allowed for Spain’s total public sector for itself. Mas reminded that Spain’s Budget Stability Law “states that the deficit levels for the whole of  Spain [for the entire Spanish public sector] have to be split into a proportional way between the Autonomous Communities and the Spanish Government”. Mas explained they will focus now on the 2014 budget, which will not bring “additional cut backs” but will aim to increase revenue. However he sent a warning message to Madrid: the Spanish Government must pay all the money it still owes Catalonia from the previous year if it wants the deficit target to be met. Opposition parties have reacted to Mas’ official announcement. Those who greater oppose the ideology of the governing Centre-Right Catalan Nationalist Coalition (CiU) – namely Spanish nationalist parties or those defending strong Left-wing stances – have strongly criticised the Catalan Executive for not presenting a proper budget for the current year and extending the 2012 accounts. While Spanish nationalist parties were criticising Mas for not approving a new budget as expected, Left-Wing parties criticised the Catalan Government for not approving a budget with “a fair” deficit, much higher than 1.58%.

On Tuesday, the President of the Catalan Government held a press conference after the weekly Cabinet Meeting, which had exceptionally met in early August to take a final decision on weather it was presenting a budget for 2013 or conversely it was continuing to extend the 2012 budget for the rest of the year. Last week, on the last day of July and with only 5 months left until the end the year, the Spanish Government announced the definitive deficit targets for 2013 for the Autonomous Communities. Despite the petitions of the Catalan Executive to have a target around 2.1%, in line with its high spending responsibilities and the 6.5% deficit allowed by the European Union to the entire Spanish public sector, Madrid imposed a 1.58% deficit for 2013 and a 1% for 2014.

The Catalan Government will nevertheless respect the 1.58% deficit target

Despite agreeing on not drafting a new budget for 2013, the Catalan President emphasised that the Catalan Executive will work to meet the 1.58% deficit target imposed by Madrid. Therefore, the guidelines ruling on the extension of the 2012 budget will be modified accordingly to meet a 1.58% deficit target. In fact, during the whole of 2013, around €1.7 billion spending have been reduced compared to 2012. In addition, some €200 million more of revenue coming from taxes are expected this year. However, further budget adjustments will be needed. Therefore, Mas explained he instructed all the Catalan Ministers to not include any new spending.

A budget below 1.8% was a no-go

The Autonomous Community governments are directly responsible for 36% of Spain’s total public spending, since they exclusively manage basic services such as healthcare, education and social policies. In addition, the Catalan Executive proportionally manages an even greater share since it also manages additional services such as police, prisons, short-distance trains and Catalan culture protection and promotion. Therefore the Catalan Government was asking for a deficit target close to a third of the 6.5% Spain’s public sector, which means a deficit around 2.1%. The Catalan Executive had already warned on several occasions that they would rather extend the 2012 budget than draft a budget with too low a deficit target. Instead, the Spanish Government – which only manages 50% of Spain’s total public spending – kept for itself 80% of the total deficit allowed by the EU and imposed on the Catalan Government a deficit target more than three times stricter. Furthermore, Mas disclosed today that they had told the Spanish Government they were ready to draft a budget with a 1.8% deficit target, but not lower. “Despite this warning, which was made at different levels within the Spanish Government, we ended up [with a deficit target] below 1.8%” underlined the Catalan Government.

More budget cuts would “destroy public services in Catalonia”

The Catalan President emphasised that since 2011, they are implementing budget cuts in order to control and reduce the public deficit. Furthermore, the Catalan Government’s deficit has been halved since 2010, a reduction that has taken place during an economic recession, with a significant fall of revenue and therefore with a higher reduction of spending. For this reason, Mas emphasised that they had “reached the bone” and that no further budget cuts could be implemented “without destroying public services in Catalonia”.

Taking the deficit target split to court

In the press conference, Mas also announced that if the Spanish Government does not change within the next month the deficit targets imposed, they will take the issue to court. The Catalan President emphasised that the current deficit targets are based on “an unfair and illegal split” because Spain’s “Budget Stability Law states that deficit levels within the Spanish State have to be split in a proportional way between Autonomous Communities and the whole of the State [the Spanish Government]”.

Focusing on the 2014 budget and on increasing revenue

Mas explained it was not worthwhile to dedicate energy to draft a budget for 2013 that, once approved, will only be in place for 3 months. Therefore, all the effort has been on formulating a budget proposal for 2014, which should be ready by early November. The effort will be “to increase revenue”, since “additional budget cuts” can no longer be made. The Catalan President explained that all the tax negotiations in the parliamentary stability agreement with the Left-Wing Catalan Independence Party (ERC) will be in place by the 1^st of January 2014. However, he also noted that there is very little room to increase revenue through new taxes because of the Catalan Government’s “very limited fiscal capacity” and the fact that many taxes are already in their higher rates.

“The deficit target imposed by Madrid will only be met if Madrid pays the money it owes”

Mas explained there were four other ways to increase revenue. Firstly, by asking for a revision or compensation of the €500 million the Spanish Government will reduce from the transfers to Catalonia, a decision announced last week. Secondly, revenue could be increased by demanding that Spain’s new fiscal scheme, which will start being negotiated next year, to have retroactive effects as of the 1^st of January 2014. The current fiscal scheme expires on the 31^st December 2013, but the Spanish Government preferred not to start the negotiations for its renewal this year and postponed them until mid-2014. Thirdly, the Catalan Government will ask for a compensation for the taxes it can no longer raise due to Madrid’s appeals. And finally, the Catalan Executive will demand the Spanish Government to pay what it owes. On this point, the Catalan President firmly stated that “the deficit target imposed by Madrid will only be met if Madrid pays the money it owes”, referring to the near €2 billion the Spanish Government legally owes Catalonia and has not paid them yet. One of amounts that is owned is the €759 million from 2011.

Most of the opposition strongly criticised the decision of not approving the 2013 budget

The opposition parties have reacted to the Catalan Government’s decision to extend the 2012 budget and not approve specific accounts for 2013. However, they did so for different reasons. The parties defending the unity of Spain criticised the Catalan Government for not approving a budget with the figure decided by the Spanish Government in order to respect the parliamentary stability agreement with the pro-independence ERC. Conversely, the more left-wing parties criticised the Catalan Government for not disobeying the Spanish Executive and approving a budget with a deficit much higher than the imposed 1.58%, which obliges the continuing budget cuts. As expected, besides the governing CiU, the only party supporting the Catalan Executive was the ERC.

The ERC’s Deputy Secretary General, Lluís Salvadó, stated they are backing up the Catalan Government’s decision. Salvadó praised they have been coherent “over the last few months”, since they had always stated that the ERC would not approve a budget with “a minimum” deficit target. Furthermore, he considered it would be “a joke” to approve a budget in October that will only be useful in November and December, blaming the Spanish Government for having not announced the definitive deficit target earlier. Besides, he stated that now they are open to talk about the 2014 budget, which will be “a step towards the [self-determination] vote”, expected for next year.

The Catalan Socialist Party (PSC) considered it was “very negative” and “very important” the fact of extending the budget and not approving new figures for 2013. The PSC’s Secretary General, Pere Navarro, accused Mas “of hiding the budget from the Parliament and the citizens”, since there is no legal need to provide detailed explanations about the budget extension guidelines. Navarro insisted that with the decision, “the priorities” agreed between the CiU and the People’s Party (PP) – approved for the 2012 budget – will not be “changed”.

The PP – which runs the Spanish Government – stated that by extending the budget Mas “is hiding his face” because he will not go to the Catalan Parliament and offer detailed explanations. The PP MP Santi Rodríguez stated that a government that claims to be “transparent” cannot “give up to the main law to express its policies”. In addition, Rodríguez said that even if the Spanish Government had allowed a 1.8% deficit target for 2013, the Catalan Government would not have approved a budget “because their strategy is to appear like victims of a government that mistreats Catalonia”.

The Catalan Green Socialist and Communist Coalition (ICV-EUiA) qualified the Catalan Executive’s decision as a “scam and huge lie”, since the budget will not be debated in the Catalan Parliament. “Catalonia has been two years without debating a budget in its Parliament, debating on which items are implemented or on revenue, whether new fiscal measures are approved or modified”, criticised ICV-EUiA Spokesperson, Dolors Camats. Furthermore, Camats asked Mas to present a budget proposal for 2013 without taking the 1.58% deficit target into account. This would be a “feasible” solution for them. In addition, the ICV-EUiA’s Deputy Spokesperson, Joan Mena, insisted that Mas would have carried out a gesture of “real sovereignty” if he had presented a budget “disobeying the deficit target”.

Finally, the anti-Catalan nationalism and populist party Ciutadans (C’s) stated that the Catalan Government is avoiding approving a budget for 2013 in order “not to burst the secessionist bubble”. The C’s Spokesperson, Jordi Cañas, believed that with further budget cuts, the Catalan Government would have put obstacles to the self-determination vote it aims to hold next year. Cañas also said that Mas was the one pronouncing this early afternoon’s speech but it had been written by Oriol Junqueras, the ERC’s leader, “who continues shaping the policies” of the Catalan Government and Catalonia.