Regional Government of Extremadura denies Catalonia’s fiscal contribution to the rest of Spain

Barcelona (ACN).- On Wednesday the Government of Extremadura, a region bordering Portugal, presented a study comparing its contributions to the rest of Spain with those of the other Autonomous Communities, particularly focusing on Catalonia. The main thrust of the report was that Catalonia was the Autonomous Community receiving the highest amount of money from the Spanish Government, which goes against absolutely all the previous studies that have established that Catalan taxes fund services, investments and infrastructure in the rest of Spain. The report was presented before the Spanish Government launches a wide debate to reform the inter-territorial fiscal scheme, which funds Autonomous Communities and transfers money from one territory to another. The Catalan Finance Minister, Andreu Mas-Colell, characterised “the political document” presented by Extremadura’s Government as a “complete nonsense”. Mas-Colell, who was Professor of Economics at Berkley and Harvard from 1972 to 1995, considered the report lacked rigour and was not a technical work. The Catalan Minister refused to comment on the document’s details in order to avoid quarrelling with Extremadura’s Regional Government.

However, on Thursday morning, in a press conference held in Madrid, Extremadura’s President, José Antonio Monago, stated that Catalonia is “a privileged territory” and questioned whether it would be able to repay its debts. In front of top figures of the People’s Party (PP) including Spanish Ministers, Monago asked Prime Minister Mariano Rajoy to punish Catalonia for not having met the deficit targets imposed for 2012 and 2013. Furthermore, Monago stated that “la pela és la pela” (“pennies are pennies”), which is an insulting idiom referring to the offensive stereotype that Catalans are miserly and greedy. After this, he added that he had “no problem with Catalonia, but some Catalan politicians are another thing”. Since Extremadura’s statements, no senior politician at Spanish level has talked to the press to openly defend Catalonia and its fiscal contributions to Spain’s welfare. On the contrary, the Spanish Deputy Finance Minister, Antonia Beteta, stated that Extremadura’s calculations show “the plurality of opinions” on the so-called fiscal balances.

Previous studies, including the only one made by the Spanish Finance Minister, stated that Catalonia annually transfers between 6.38% and 8.70% of its GDP (depending on the calculation formula) to the rest of Spain. Depending on the calculation formula, Catalans are giving away between €13 billion and €17 billion each year to fund services, investments and infrastructure to the rest of Spain. In 2009, 43% of Catalan taxes were spent outside Catalonia, for instance in Extremadura. A study made by the Catalan Government showed that between 1986 and 2010, Catalonia has given away an average of 8% of its GDP each year, which is equivalent to some 6 Marshall Plans in comparable currency. This means that Catalans have given 200% of Catalonia’s GDP to the rest of Spain in 25 years, an amount that nowadays would represent some €400 billion.

In fact, an historical demand of an extremely wide majority of Catalan society (equivalent to some 80% according to polls) is to reduce this contribution, since Catalan institutions and services are under-budgeted. This seriously affects Catalonia’s public services, particularly damaging social cohesion and affecting the most vulnerable. In order to keep the quality of the services, deficit has to be generated, which then turns into an accumulative debt. On top of this, it harms the competitiveness of the Catalan economy, which is the main economic engine of Spain and indeed of Southern-Europe. The Spanish Government’s lack of investment in Catalonia delays key infrastructure, such as the Mediterranean Railway Corridor and the renovation of Barcelona’s short-distance train network.

Catalan parties proposed a Fiscal Agreement, similar to the Basque Country's and Navarra's model, to address this issue. However, the Spanish Government even refused to start talking about it. Catalan parties do not support elimination of inter-territorial solidarity, but a reduction of it. They have been arguing in favour of the establishment of a transparent system that limits contributions. In fact, no other region in Europe gives so much money in inter-territorial solidarity than Catalonia. On top of this, Catalonia has been a net contributor to the European Union for decades. However, politicians from Extremadura have for years been presenting Catalonia as a selfish and greedy territory. And very few voices in the rest of Spain recognise Catalonia’s contribution.

According to Extremadura’s report, Catalonia is not a net contributor

The report presented by Extremadura’s regional Government stated that Catalonia is a privileged territory, receiving 4,340.89 euros per inhabitant from the Spanish Government, which makes it top of the ranking. Valencia (also called Valencian Country) comes second with 3,273.43 euros, followed by the Balearic Islands with 3,161 euros. Extremadura would occupy to 10^th position with only 2,605.37 euros. Furthermore, the report includes many items, such as the loans given by the Spanish Government to the Catalan Executive to be paid back over many years together with their interest rates. However the report allocates all the loans to the current year and treats them as regular transfers or investments, without taking into account that they generate a debt to be returned. On top of this, the report points out that Catalonia is the Autonomous Community with the highest debt per inhabitant with 7,104.50 euros, while Extremadura is last with 2,304.50 euros.

Besides, the report highlights that thousands of people born in Extremadura now work in Catalonia or Madrid, which makes the region “a net workforce contributor”. Between the 1950s and 1970s, Catalonia hosted millions of people coming from other parts of Spain – such as Extremadura, Andalusia and Galicia – looking for job opportunities. The Government of Extremadura on previous occasions referred to these people and their descendants – already born in Catalonia – as being their citizens, despite their opinion or feelings.

Highly-subsidised Extremadura does not want to receive reduced funds

Extremadura, which according to all the previous studies is the most highly subsidised region in Spain and one of the main ones at European level, does not want to lose funds in the reform of the new fiscal scheme. Probably for this reason, it has published a document presenting itself as one of the main contributors to Spain’s economy. In addition, in the current political tension regarding Catalan self-determination, it has focused its report on a constant comparison with Catalonia, presenting it as a privileged territory that receives much more money than it generates. Catalonia has a GDP of some €205 billion (approximately the size of Portugal’s) while Extremadura has a GDP of €17 billion, 8% of Catalonia’s. In addition, it has a GDP per capita of some €16,000 per inhabitant, while Catalonia has a GDP per capita of some €28,000 per inhabitant. Extremadura’s GDP per capita is 68% of Spain’s average, while Catalonia’s represents 120%.

However, Spain’s poorest region in GDP per capita happens to have one of the best healthcare systems, offering some free health treatments that for instance Catalonia cannot afford. In addition, it offers cheques for new-born babies, when they have been suppressed in the rest of Spain, it has compensated the cultural sector for the VAT increase and it has empty toll-free highways. In addition, thanks to the funds received, it posted a public deficit way below the deficit target despite having lowered Income Tax for people earning less than €24,000 per year. On the other hand, Catalonia has the highest taxes in Spain, was the first territory to undertake budget cuts and many services, such as highways, are not free.

The regional Government of Extremadura is presenting all these achievements as the result of their good management and they never talk about the funds received. In addition, when some Catalan politicians have complained about the large amount of subsidies received by Extremadura while they were asking for a reduction in Catalonia’s contributions to inter-territorial solidarity, Extremadura politicians have accused them of being selfish and greedy for claiming having part of Catalans’ money back, since public services in Catalonia are under severe stress.