Spanish Ministry for the Economy is willing to split deficit targets “equitably” among government levels

Madrid (ACN).- The Spanish Government might finally accept the need to review Spain’s internal deficit targets among the different government levels. On Monday, the Spanish Ministry for the Economy, Luis de Guindos, accepted  the need to distribute deficit targets “equitably” within the public sector, since Spain is “the most interested party” in presenting “a reasonable, credible and efficient” proposal. De Guindos was the first member of the Spanish Government to open this door. He did so in front of the European Commissioner for Economic and Monetary Affairs, Olli Rehn, who stated that the Autonomous Communities are now in a better situation than they were months ago regarding fiscal consolidation. De Guindos’ announcement also came two weeks after the European Parliament asked EU Member States to split deficit targets internally “equitably” for the benefit of the public services aimed at the citizens. The Catalan Government has been insisting on the need to redistribute deficit objectives internally in Spain – without increasing the total deficit objective – since currently, the Spanish Government is keeping most of the deficit allowed by the European Union for itself, despite the fact that it only represents 50% of Spain’s total public spending. Furthermore, this has forced regional and local governments to a Draconian budget adjustment. The Autonomous Communities are particularly affected by this decision, since they deal with more than 36% of Spain’s total spending, including the exclusive management of public healthcare, education and social policies, but in 2013 they are only allowed 15% of the deficit target (0.7%, when Spain’s total is 4.5%), while the Spanish Government is keeping 85% of the total deficit allowed for itself. The Catalan Finance Minister, Andreu Mas-Colell, has proposed that the Autonomous Communities should be allowed a 1.5% deficit objective in 2013, representing a third of that allowed by Brussels. This would oblige the Spanish Government to make its own deficit target stricter and to implement drastic budget cuts, which are now mostly being applied by the Autonomous Communities.

Olli Rehn: “Spanish regions are now in a better condition to meet their fiscal targets”

Luís de Guindos gave the press conference along with the European Commissioner Olli Rehn who was on an official visit to Madrid, coinciding with the International Monetary Fund’s mission to Spain to evaluate the bailout of banks. Rehn stated that the “Spanish regions are now in a better condition to meet their fiscal targets”. The Finnish Commissioner praised “the great effort” made by all the levels of government within Spain in order to control the public deficit. Rehn linked fiscal consolidation with economic recovery in both the short and long run, creating stability. In addition, he pictured an ideal scenario combining economic growth, to enable an increase in revenue and carry on with adjustments and reforms. He forecasted “a difficult year”, although economic recovery should “gradually” start this year and “become more robust” in 2014. Besides, he stated that the main priority now in Europe is to fight unemployment. In this chapter, he judged Spain’s 55% youth unemployment rate to be “unacceptable” and he urged Spain to continue with its labour market reforms.

De Guindos, the first member of the Spanish Government to talk about redistributing deficit targets

The Spanish Ministry for the Economy emphasised that the government levels in Spain are “all in the same project” and “have the same will” to control and reduce the public deficit. However, it is becoming more obvious that the deficit objectives imposed on the Autonomous Communities are too strict, since they are responsible for exclusively managing Spain’s main Welfare State services and they deal with more than 36% of the country’s public spending. In addition, some Autonomous Communities’ governments, such as in Catalonia, deal with a proportionally larger share, since they have more devolved powers, such as prisons, police and short-distance trains. However, in 2012, when Spain as a whole had a 6.3% deficit target, the Catalan Government had an imposed target of 1.5%, representing 23% of the total deficit allowed. In 2013, Catalonia’s deficit target will be even stricter, having to meet an imposed target of 0.7%, when Spain as a whole is allowed 4.5% (15% of it). Therefore, the Catalan Finance Minsiter, Andreu Mas-Colell is asking for a more realistic and fairer redistribution. Furthermore, taking into account the fact that the Catalan Government was the first Autonomous Community to implement budget cuts and it has reduced its current spending by 15% over the last 2 years, without taking into account debt interest payments (otherwise the spending reduction represents 8%), all implemented in the context of a recession.

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