Rajoy will not review the Autonomous Communities’ deficit targets if Brussels does not allow greater flexibility

Madrid (ACN).- On Wednesday, after the contradictory messages sent by two members of his cabinet on Monday and Tuesday, the Spanish Prime Minister, Mariano Rajoy, confirmed that if the European scenario does not change and the European Union does not allow Spain greater flexibility regarding the 4.5% deficit target for 2013, the Spanish Government will not review the deficit targets imposed on the Autonomous Communities. Out of the 4.5% deficit objective allowed by Brussels for Spain’s entire public sector at the end of the current year, the Spanish Government has kept 85% of it for itself (a target of 3.8%) and has only allowed the Autonomous Communities 15% of it (a target of 0.7%), despite the fact that the latter manage the basic public services – such as healthcare, education and social affairs – and almost 40% of Spain’s entire public budget. In fact, the Catalan Government has asked for a fairer internal distribution of deficit targets, stating that they should be allowed a 1.5% deficit, considering their spending share and the importance of the services this has to fund, which affect the core of the Welfare State. The European Parliament also stated two weeks ago that deficit targets should be split internally in a “fair way” among the different government levels. However, the Spanish Government – which unilaterally decides how to split them within Spain – is reluctant to modify them. On Monday it looked like this approach might change, but on Tuesday doubts appeared again and on Wednesday Rajoy clarified the situation and closed the door on internally reviewing the deficit targets. Furthermore, he praised the “patriotic effort” the Autonomous Communities are making to reduce their deficit, since they have assumed most of Spain’s budget adjustments.

If the Autonomous Communities have to take on most of the budget reductions, it means they are rolling up part of their powers previously deployed and that the Spanish Government is benefiting from this tactical withdrawal, occupying part of the space left, increasing its powers and therefore pushing for a recentralisation of Spain. In other words, as has been denounced in Catalonia, the fiscal asphyxia of the Autonomous Communities allows the Spanish Government to have a greater control over them and increase central power. This goes against the evolution of Spanish politics after Franco’s death, since decentralisation was one of the main pillars of the new democratic regime. Regarding Catalonia, this recentralisation is even more problematic, as the recovery of Catalonia’s self-government was an essential part of the Constitutional pact and the democratic transition.

On Monday the Spanish Minister for the Economy, Luís de Guindos, stated that Spain may internally redistribute its total deficit target among the different government levels in order to give more breathing space to the Autonomous Communities, which already implemented and still have to take in 2013 on a large part of the budget adjustment. De Guindos had just had a meeting with the European Commissioner for Economic and Monetary Affairs, Olli Rehn, who praised Spain’s efforts. Rehn also stated that the Autonomous Communities are now “in a better situation to meet their fiscal obligations” than a year ago. De Guindos’ press conference was the first time that a member of the Spanish Government has publicly stated that deficit targets might be internally redistributed.

Contradictory messages from the Spanish Government

However, the following day, the Spanish Finance Minister, Cristóbal Montoro, ruled out this possibility, if Brussels does not give greater flexibility to Spain and increase its total deficit target of 4.5% for 2013. In other words, the Spanish Government refuses to share part of its self-imposed 3.8% deficit target with the Autonomous Communities and increase the latter’s 0.7% deficit objective.

The Catalan Government noted that the Spanish Government could redistribute the deficit target already allowed

The Catalan Government reminded Montoro that the Spanish Executive does not have to wait for Brussels to give Spain more flexibility and increase the 4.5% deficit objective, as it could reduce its own share and allocate the difference to the Autonomous Communities. The Catalan Government is defending the proposal that the Autonomous Communities should be allowed a deficit target of 1.5% in 2013, as this corresponds to a third of the 4.5% total objective, closer to the Communities’ share of the total public spending within Spain.

Rajoy intervenes and closes the door on reviewing the deficit targets, without change from Brussels

The Spanish Prime Minister has intervened in the debate to clarify the position of the government he chairs. Answering a question from Josep Sánchez Llibre, an MP from the Centre-Right Catalan Nationalist Coalition (CiU), Rajoy stated in the Spanish Parliament that only “a change” in Spain’s total deficit allowed by Brussels might turn into relaxing the deficit objectives of the Autonomous Communities. He stated that otherwise “in the current situation, it will not be a positive message to be sent to the markets, and our funding is mainly dependant on them”. However, Rajoy praised the “patriotic efforts” of the Autonomous Communities’ governments in reducing public deficit.