Rajoy accepts the Catalan President’s offer to talk but rejects any modification of the 0.7% deficit target for 2013

Barcelona (ACN).- On Friday, the Spanish Prime Minister, Mariano Rajoy, accepted the offer sent on Thursday by the new Catalan President to talk about Catalonia’s claims. However, Rajoy emphasised that the discussion will “always” be framed “within the Constitution”, which means he is not keen to discuss the organisation of a self-determination vote in Catalonia. Furthermore, Rajoy has rejected the possibility of modifying the 0.7% deficit target imposed on the Autonomous Communities by the Spanish Government for 2013. On Thursday, after the first Cabinet meeting of the new Catalan Executive, Andreu Mas-Colell, Catalonia’s Finance Minister, emphasised that, in order to meet next year’s deficit target, a €4 billion adjustment would be needed. Furthermore, he explained that, if the payment of financial interests is excluded, meeting next year’s 0.7% deficit target means that the Catalan Government would end 2013 with a budget surplus. “This makes no sense from an economic point of view in a context of recession”, underlined Mas-Colell, who is one of the world’s most-recognised experts in mathematical economics and a former professor at the universities of California (Berkley) and Harvard. Mas-Colell proposed to continue with the austerity efforts but in a more gradual way and without affecting “the bone” of social services, which would imply the redistribution of Spain’s total 4.5% deficit target among the different government levels. The Catalan Finance Minister proposed that the Autonomous Communities meet a 1.5% deficit target in 2013, which is a third of the total 4.5% target because together they represent more than a third of Spain’s total public expenditure and they manage the basic services of the Welfare State. However, Mas-Colell also emphasised that, if in the end the Spanish Government does not accept the deficit redistribution, the Catalan Government will design a budget for 2013 to meet the 0.7% target. This situation would inevitably “touch the bone” of basic services, he warned.

The Spanish Prime Minister, Mariano Rajoy, gave a press conference on Friday at the Moncloa Palace in which he made a review of the last year. Yesterday, the Spokesperson of the Catalan Government and new Minister for the Presidency, Francesc Homs, stated that the Catalan President, Artur Mas, was willing to meet with Rajoy to discuss Catalonia’s claims. When Rajoy was asked about the issue on Friday, he answered he “will be pleased to talk with Mister Mas”. However, he underlined he would do so “always within the framework of the Constitution”. In addition, he said to be willing to “better fit demands for diversity” but always “respecting the rules, the procedures and with reciprocal loyalty”. However, he defended “unity as a strength”, in order to be heard more in Europe.

No to the Constitution’s reform

Furthermore, when asked about a hypothetical reform of the Spanish Constitution to fit with Catalonia’s claims for self-determination or greater fiscal autonomy, Rajoy rejected this possibility. According to him, the Constitution “is not a thing that cannot be touched”, but “it can be reformed”. However, in order to do so, “the widest possible consensus is needed”, as well as “unity” and “opportunity”. Rajoy stated that, since “these principles are not being met” at the moment, according to him, the reform is not a priority right now. Furthermore, he added that the Constitution “is fit to face anything that might happen in Spain within the next ten years”. Reforming the Spanish Constitution to allow a self-determination referendum in Catalonia is a possible way out of the current situation proposed by the Catalan Socialist Party (PSC). However, the People’s Party (PP), led by Rajoy, is opposed to it, and the Spanish Socialist Party (PSOE) is not convinced by it despite the PSC’s statements.

No to modifying the Autonomous Communities’ 0.7% deficit target for 2013

Rajoy also closed the door against relaxing the 0.7% deficit target the government he chairs has imposed on the Autonomous Communities for 2013. For next year, Spain as a whole has been granted a 4.5% deficit target by the European Union. The Spanish Government has split this 4.5% among the different government levels following its own criteria and therefore it has kept a 3.8% target for itself and has imposed a 0.7% target on the Autonomous Communities. It happens that the Autonomous Communities are responsible for almost 40% of Spain’s total public expenditure and they manage and fund basic Welfare State services such as healthcare, education and social policies. In addition, some Autonomous Communities, including Catalonia, also manage services such as prisons and police. A drastic reduction in the budget of the Autonomous Communities means a drastic reduction in the quality of Spain’s Welfare State services. The Spanish Government, which manages 50% of Spain’s total public expenditure has granted 84% of the deficit allowed by Brussels for itself.

Catalonia proposes a 1.5% deficit target for the Autonomous Communities in 2013, representing a third of the deficit allowed

The Catalan Finance Minister, Andreu Mas-Colell, who is a former professor at Harvard and Berkley, explained that the 0.7% deficit target imposed on the Autonomous Communities “makes no sense from an economic point of view in a context of recession”. Mas-Colell explained that a 0.7% deficit target represents around a €1.6 billion deficit. However, the Catalan Government will have to pay more than €2 billion only in financial interest in 2013. This shows that imposing a 0.7% deficit means ending the year with a budget surplus if financial interest is not taken into account. The prestigious economist argued that, in the context of a recession, “it makes no sense” to have a greater revenue than expenditure. Therefore, since the Autonomous Communities represent almost 40% of Spain’s total expenditure, he proposed to internally redistribute the total deficit target and allocate a third of it to the Autonomous Communities. As he said, a 1.5% deficit target for the Autonomous Communities would be “reasonable”. However, Mas-Colell also emphasised that, if in the end the Spanish Government does not accept the deficit redistribution, the Catalan Government will design a budget for 2013 to meet the 0.7% target. This situation would inevitably “touch the bone” of basic services, he warned.