The Catalan Finance Minister points towards extending the 2012 budget for the whole of 2013

Barcelona (ACN).- “2013 is done. We now need to think about 2014”, summed up the Catalan Finance Minister, Andreu Mas-Colell, after finding out about the 1.58% deficit target imposed yesterday by the Spanish Executive. Mas-Colell considers this target to be “intolerable” since it “financially asphyxiates” Catalonia and represents implementing a €2.6 billion adjustment this year. The Catalan Executive was waiting to find out this figure in order to approve its definitive budget for the current year, but considering the low deficit target it is now considering extending the 2012 budget for the whole of 2013 – as it has been doing so up until now. The Left-Wing Catalan Independence Party (ERC), which shares a parliamentary stability agreement with the governing Centre-Right Catalan Nationalist Coalition (CiU), also supports focusing on next year’s budget and extending the 2012 budget to 2013, since the current budget guidelines have a stricter deficit target. However, the ERC’s President, Oriol Junqueras, stated he asked the President of the Catalan Government, Artur Mas, “to speed up” the self-determination process as it is “the only way” to obtain “our own Catalan Treasury” in order “to collect all our taxes”; otherwise “it is the Spanish Finance Ministry who decides how much money we have”, he stated. The Catalan Government will take the final decision on the issue next Tuesday. Furthermore, Mas-Colell warned that a €1.7 billion budget adjustment will be needed in 2014, which will be required to increase one-off revenue since the Catalan Government “cannot spend less than in 2013”.

After the Spanish Government finally announced on the last day of July the definitive deficit targets for the Autonomous Communities for the current year, the Catalan Government and its political allies are studying the new budget scenario. The 1.58% deficit target finally imposed is considered to be totally insufficient, obliging the implementation of dreaded additional budget cuts, following more than two years of severe budget cuts affecting all government departments. In fact, the President of the Catalan Government, Artur Mas, and the Catalan Finance Minister, Andreu Mas-Colell, have repeated on several occasions over the last few months that no further budget cuts could be implemented without severely affecting services such as public healthcare and education which, in Catalonia, are exclusively provided by the Catalan Government. The Catalan Executive was expecting a final deficit target between 1.8% and 2.1% for 2013, close to a third of the 6.5% deficit target allowed by the European Union to the entire Spanish public sector. Since the Autonomous Community governments (such as the Catalan) are managing around 36% of Spain’s total public spending, including basic services such as healthcare, education and social policies, the Catalan Government was asking for a figure close to a third of the total deficit allowed by the EU. However, as the Catalan Finance Minister was emphasising yesterday, the Spanish Government has kept much of the deficit target allowance for itself, giving itself the objective to end 2013 with a 5.2% deficit target (80% of Spain’s total deficit), when it is only responsible for 50% of the public spending.

Mas-Colell wants to keep the spending levels of 2013 in 2014

Andreu Mas-Colell, who is a former Economics Professor at Berkley and Harvard, warned that “the financial asphyxia” the Spanish Government is carrying out on the Catalan Executive will continue to 2014 as well. Yesterday, the Spanish Government approved not only the deficit target for 2013 but also that of 2014. Next year, all the Autonomous Communities will share the same deficit objective, set at 1%. Mas-Colell explained that passing from the 2012 budget to a budget in 2013 with a 1.58% deficit represented an adjustment of €2.6 billion, which should mainly be made through spending reductions. In fact, Mas-Colell emphasised that in 2013 the Catalan Government is spending less than in 2012, “everybody realises this”, he said. However, he also said that the Catalan Government cannot continue to reduce spending, since it has “reached the bone”. Therefore, in 2014, Mas-Colell is committed to maintain the spending levels of 2013. “We will spend the same, but not less”, he stated. However, a major budget adjustment will have to be made next year as well.

A budget adjustment of at least €1.7 billion in 2014

In 2014, the Catalan Government will be obliged to meet a 1% deficit target. Passing from a 1.58% deficit target in 2013 to a 1% deficit target in 2014 means reducing the deficit by €1.2 billion. However, Mas-Colell reminded that, on top of this, the Spanish Government will fund the Catalan Government with at more than €500 million less in 2014. Yesterday, Mas-Colell considered that reducing the funds for 2014 was “a mockery”, since calculations forecast that public revenue will increase in Spain because the improvement of the economic situation. However, this amount could even reach €1 billion, depending on the final calculations, meaning the Catalan Executive will suffer from a significant revenue reduction in 2014. Therefore, if this amount is added to the aforementioned €1.2 billion, the Catalan Government will have to undertake a budget adjustment of between €1.7 and €2.2 billion in 2014, while keeping the same levels of public expenditure of 2013. Mas-Colell recognised that they will have to develop an “imaginative” policy to generate revenue. The Catalan Finance Minister reminded that the Spanish Government owns the Catalan Executive around €2 billion in pending payments from last year regarding the current funding scheme. Mas-Colell is optimistic to be able to obtain all, or at least a significant part, of this money. In addition, they will be envisaging “one-off measures” – which can only be implemented once – such as selling assets or privatising services.

A new fiscal scheme for 2014

In any case, Mas-Colell reminded that the current fiscal scheme funding the Autonomous Communities ends this year and that the new one should be in place in 2014. However, the Spanish Government already stated they will not implement it in 2014 since they will wait for an expert report that will not be ready until March 2014 to start the discussions. Mas-Colell insisted that they will claim to put the new system to be in place in 2014, which will  be in effect from the 1^st January. In this new scheme, Catalonia “will have a lot to say regarding the recovery of revenue”, since the last studies show that Catalan tax payers have been giving away an annual average of 8.5% of Catalonia’s GDP in services and investments made in the rest of Spain.

The ERC asks for the speeding up of the Catalan self-determination process

The President of the Left-Wing Catalan Independence Party (ERC) reacted to the Spanish Government’s imposition of a 1.58% deficit target. Oriol Junqueras stated it was “impossible” to draft a budget with a deficit that “asphyxiates Catalan society”. According to the ERC leader, this “asphyxia” is “premeditated by the Spanish Government”. Junqueras also supported the idea of extending the budget of 2012 during the whole of 2013 by adapting the extension’s guidelines. Currently the guidelines set a 1.3% deficit and therefore there is room to increase it to 1.58%, “allowing a spending prioritisation” in the last months of the year. For Junqueras, now the effort has to focus on working on the 2014 budget but also on “speeding up the self-determination process”. According to the ERC leader, this is “the only way” to obtain “our own Catalan Treasury” in order “to collect all our taxes”, since otherwise “it is the Spanish Finance Ministry who decides how much money we have”. Therefore, he has asked the Catalan President to increase the effort to develop a Catalan Tax Agency and Treasury.