The Catalan Government posts a debt of €50.95 billion at the end of 2012

Barcelona (ACN).- On Wednesday evening, the Catalan Finance Minister, Andreu Mas-Colell announced that the Catalan Government had a public debt of €50,948 million on the 31^st of December of 2012. Over the last 2 years, Catalonia’s debt has increased by €16 billion due to the financial crisis, resulting in a drop in revenue and having to pay high financial interests for institutional loans. In fact, in 2013 the Catalan Government will have to pay €2.2 billion in debt interest only. This amount is equivalent to around 8% of the Catalan Government’s budget and to 1% of Catalonia’s annual GDP. These figures would indicate that Catalonia is a poor territory, which needs to borrow money to pay for its public services. The first statement is false, but the second is true. Catalonia has been a net contributor to the European Union for decades, with a nominal GDP of more than €200 billion in 2011 – above that of Finland, Portugal, Greece and Ireland – and a GDP per capita of some €27,400 – between the United Kingdom (€27,800) and Italy (€26,000). In addition, for the last 27 years Catalonia has been paying an average of 8.5% of its annual GDP to the rest of Spain to finance public services and infrastructure, a transfer of money representing €17 billion per year with current data. On top of this, Catalan citizens pay the largest amount of tax in Spain, with one of the highest Income Tax levels in the world (56% for the wealthiest citizens). Data from 2009 says that 43% of the taxes paid by Catalans never came back to Catalonia; in that year Catalan taxpayers only received 57 cents back from each euro paid in taxes in the form of investments or services; the rest went to the pay for items outside Catalonia. This results in the Catalan Government – which is called the Generalitat – not receiving enough money from the Spanish Executive, which raises most of the taxes and distributes revenue in Spain to fund the Autonomous Community governments. On top of this, the Spanish Government itself has not been investing the required amount in the infrastructure and services in Catalonia that are directly run from Madrid, as was acknowledged by the Spanish Parliament in 2005.

Catalans have been asking for a fairer fiscal redistribution for many years

Therefore, Catalan political and economic classes, as well as many civil society organisations, have been complaining about the poor funds invested in Catalonia by the Spanish Government and the under-funding of the Catalan Executive. For instance, the Generalitat has been complaining for almost 15 years that Catalonia’s public healthcare, entirely managed by the Catalan Executive, has been lacking funds to pay for its services, and this has been generating a deficit each year and has accumulated a large debt. The reason for this is that in the last 15 years the Catalan population significantly increased due to the arrival of immigrants but the Spanish Government did not allocate more funds for Catalonia’s healthcare in the same proportion. Therefore the healthcare system has been under stress with a larger rise in costs compared to the funds available. Similar facts also explain why Catalan politicians, businesspeople and social organisations have been complaining for decades about the Generalitat’s funding and the need for a new economic agreement between Catalonia and Spain. They are insisting that the new fiscal scheme should guarantee solidarity with poorer areas but limit this to an amount that does not jeopardise public services in Catalonia, with an investment per inhabitant that is way below other areas in Spain that are subsidised. In addition, subsidised regions have lower taxes, a fact that creates an “unfair” fiscal competition with Catalonia. Therefore, considering that Catalans have been complaining for so many years without any significant results, many have given up trying to convince the Spanish Government and directly claim for independence. Others would like a specific economic agreement allowing the Generalitat to raise all taxes, but the Spanish Government refuses to even talk about it.

The Catalan Government’s debt represents 25.9% of Catalonia’s GDP

Andreu Mas-Colell explained to the Catalan Parliament that by the end of 2012, the Generalitat’s debt reached €50,948 million (€50.95 billion), representing 25.9% of Catalonia’s GDP. Mas-Colell stated that the debt particularly increased in the last quarter of the year, adding €5 billion to the total amount. “It is an impressive figure”, recognised the Catalan Finance Minister. As a consequence of the growth in debt, the amount of interest to be paid back also increased, reaching €2.2 billion in 2013. In 2012, debt interest represented €2 billion, €200 million less. In 2013, debt interest will grow, revenue will drop due to the economic recession and the deficit level allowed is lower, which in turn means that the Catalan Government has to make further fiscal consolidation efforts, by either creating new taxes or cutting down spending. In these circumstances, the 0.7% deficit target currently unilaterally imposed by the Spanish Government would represent a €4.4 billion adjustment in a single year, to be implemented after already facing two years of budget cuts. Mas-Colell has already warned that if the deficit targets are not modified, public services in Catalonia will crumble.

Catalonia’s fiscal deficit

According to official data from between 1986 and 2009 released by the Catalan Government, Catalonia has been giving an average of 8.5% of its GDP to pay for services and investments made in the rest of Spain (calculated using the monetary flow formula). The Spanish Government has only released this sort of data once, in 2008, with data from 2005. It showed that Catalonia had a fiscal deficit of between 6.38% and 8.70% of its GDP, depending on the formula used. In 2005, this amount represented a fiscal redistribution effort ranging from €10.86 billion to €14.81 billion respectively. Nowadays, it could represent a redistribution of almost €17 billion. This imposed solidarity effort is judged to be excessive by a large part of the Catalan society, which would like the fiscal deficit to be reduced and limited, especially when essential infrastructures are not being built and public services are being under-budgeted in Catalonia.