The Catalan Government had a 1.96% deficit in 2012, according to the Spanish Finance Ministry

Madrid (ACN).- On Thursday the Spanish Finance Ministry announced the deficit figures for 2012 and the Catalan Government had a deficit of 1.96% last year. This means that the Catalan Executive – which is called the Generalitat – reduced its deficit by half in just one year, dropping from a figure of 4.02% to only 1.96%. Despite the significant reduction, the figure is still above the 1.5% target unilaterally imposed by the Spanish Government. However, the Generalitat had been warning the Spanish Executive since it was decided that a 1.5% target was not realistic, as it does not relate to its spending responsibilities managing the basic Welfare State services. Furthermore, the Catalan Finance Minister, Andreu Mas-Colell, insists that the 0.7% deficit target is unfair and not rigorous in the context of an economic recession. The Autonomous Communities – which manage 36% of Spain’s total public spending – had a global deficit of 1.73% between them.  Spain as a whole ended 2012 with a deficit of 6.74%, according to the Spanish Finance Ministry, Crístobal Montoro. This figure is 0.44 points over the 6.3% target imposed by the European Union. The Spanish Government posted a final deficit of 3.83%; Social Security – managed by the Spanish Government – had a 0.96% deficit and local governments a deficit of 0.2%. Barcelona City Council ended up with a budget surplus of €117 million. These figures do not take into account the banks’ bailout. If the money allocated to rescue some banks was accounted for, Spain would have ended up with a 10% deficit in total. The bank’s bailout represents 3.25% of Spain’s GDP. This should be added to the Spanish Government’s deficit, and therefore it would have increased from a 4.79% deficit (resulting from adding on the Social Security deficit) to an 8.04% deficit.

The Government of Catalonia had a deficit of 1.96% according to the Spanish Executive, just below €4 billion. However, this figure – which is already very accurate – is not the definitive one, which will be known in a few months after the official audits are finished and all the payments have been taken into account. The Generalitat had already corrected the initial preliminary figure last week, which was released in late January, in order to have an early estimation of the deficit’s magnitude. In late January, the Catalan Government released a preliminary figure of 2.3%. It also stated that, if the Spanish Government had acted loyally and paid Catalonia its debts and not transferred part of its deficit, the Catalan Executive would have ended 2012 with a deficit of 1.53%. The preliminary figure of 2.3% was corrected last week with more accurate data and the Catalan Finance Minister, Andreu Mas-Colell, announced that the Generalitat deficit would represent 2% of Catalonia’s GDP.

The strict deficit targets do not correspond to the high spending responsibilities

The Catalan Government had already warned months ago that the 1.5% deficit target unilaterally imposed by the Spanish Government was not in line with the Autonomous Communities’ spending responsibilities, which manage 36% of the total public spending. Catalonia proportionally manages a greater share since it has more devolved powers, such as prisons, police and short and medium distance trains. In 2012, the Autonomous Communities were given 23.8% of the 6.3% deficit allowed by Brussels to the entire Spanish public sector, corresponding to the 1.5% deficit target. In 2013, the EU is imposing a 4.5% total deficit on Spain and the Spanish Government is keeping 85% of it for itself and only allowing the Autonomous Communities 15.5% of it, corresponding to a 0.7% target. The Catalan Finance Minister has stated that if he had to design the 2013 budget with deficit of 0.7% it would be “monstrous”, since it would oblige him to implement much tougher budget cuts, affecting the public services in Catalonia to the bone, including healthcare, education and social affairs, in the middle of an economic recession.

The Catalan Government asked for greater flexibility in 2013

Therefore, Mas-Colell has asked for the deficit targets to be internally redistributed among the different government levels, raising that of the Autonomous Communities. Mas-Colell will insist on this petition if the European Union finally allows Spain a higher deficit target. It would not make sense to raise the total deficit target of the Spanish public sector and not raise that of the Autonomous Communities, managing 36% of the total public spending, including healthcare and education. In this vein, a few weeks ago Mas-Colell sent a letter to the European Commissioner for Economic and Monetary Affairs, Olli Rhen, asking to guarantee that if Spain is allowed more flexibility, the Spanish Government will not be able to keep it only for itself and will have to share the additional room to manoeuvre with the Autonomous Communities. However, the European Commission – as it usually does with uncomfortable questions and petitions, especially if they go against the direct interests of a Member State government – stated that it is “an internal matter” and refused to answer.

Montoro refuses to review the deficit targets for 2013

However, despite the Catalan Government’s claims, the Spanish Finance Minister stated that the deficit targets for 2013 will not be modified, at least, not until Brussels allows Spain a higher deficit target. The Spanish Government has asked the European Union to raise the 4.5% deficit for 2013 and the Olli Rehn stated a few days ago that he will not take any decision without having firstly assessed the 2012 data.

Montoro defends the Autonomous Communities’ system

In a press conference presenting the deficit figures for 2012, Crístobal Montoro wanted to defend the Autonomous Communities’ system, emphasising the significant effort made by the regional governments to reduce their deficit. The Autonomous Communities ended 2012 with a total deficit of 1.73%, only 0.23 points above the 1.5% target. Montoro stated that those who are suspicious about their capacity to manage their finances had no base for their suspicions. However, over the last few months, Montoro has played an ambiguous role on this issue, not fighting against it and even promoting the Autonomous Communities being discredited. The reason for that might be to focus the attention on this government level, and away from the Spanish Government itself. Another reason is that by discrediting the Autonomous Communities’ managerial capacities, those supporting the recentralisation of Spain have an argument that goes beyond Spanish nationalist feelings.

Furthermore, Montoro advised that despite the Autonomous Communities’ relatively positive results for 2012, the effort “must continue”. However, Montoro stated that in 2013, “no further adjustments will be needed” – besides those already in place – because most of the Autonomous Communities have already closed their budgets for 2013 and “the objectives are set”. Catalonia, since it held elections in the last term of 2012, is still making its budget for 2013.

Finally, Montoro refused to talk about any possible sanctions on the Autonomous Communities that have not met the deficit targets for 2012. They are: the Valencian Community – also known as Valencian Country – (3.45%), the Region of Murcia (3.02%), Andalusia (2.02%), Catalonia (1.96%), the Balearic Islands (1.83%) and Castilla-La Mancha (1.53%). “We are already implementing” the Budget Stability Law, “because [otherwise] these results would not have been possible”, said the Minister. Montoro also stated he will wait to have the definitive data before disclosing further actions.

Local governments ended the year with a deficit of 0.2%, below the 0.3% target

Town halls and provincial councils ended last year with a deficit below the 0.3% target imposed. Altogether they had a 0.2% deficit, while, individually, many of them posted a budget surplus. One of them is Barcelona City Council, which had a budget surplus of €117 million out of a €2.3 billion budget.