The Catalan Government presents its third austerity plan based on further budget cuts “obliged” by Madrid and Brussels

Barcelona (ACN).- The Catalan Government presented its third austerity plan in the last 18 months on Tuesday in order to meet this year’s public deficit target, set at 1.5% of Catalonia’s GDP. The plan represents an additional reduction of €1.5 billion to a budget approved three months ago. The President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU), Artur Mas, emphasised that they were obliged by Madrid and Brussels to present an additional austerity plan, since the Spanish Government refuses to pay the money it owes Catalonia and the European Union rejects reviewing Spain’s deficit targets despite the recession. In addition, Mas blamed the Spanish Government for “centrifuging its own deficit to the Autonomous Communities” by “reducing its own spending but transferring it to the Autonomies without providing them with the tools to increase their revenue”. The Catalan President admitted the “inconveniences” caused to the citizens by the budget cuts but he pointed out that the plan “guarantees essential services”. Mas was joined by the Catalan Finance Minister, Andreu Mas-Colell.

The Catalan Government’s third austerity plan is based on six main issues. Firstly, confirming the 5% salary reduction to public employees in 2012, which is added to previous salary reductions. Secondly, the Government will reduce budget allocations to public companies, which might cause the restructuring of resources and staff lay offs. Thirdly, public subsidies will be reduced and vocational training will no longer be provided for free. In addition, investments will be slowed down and rescheduled. Furthermore, the Catalan Government will sell public buildings and will privatise public companies. Finally, it will implement the austerity measures on health and education decided by the Spanish Government.

All the opposition parties criticised the plan for not being effective and concrete enough, since Mas did not provide specific budget figures for each measure. In addition, they asked Mas to explain it before the Catalan Parliament. The People’s Party (PP) criticised Mas for blaming the Spanish Government and not assuming its own responsibility. The Left-Wing parties (PSC, ICV-EUiA, ERC, and C’s) criticised Mas for focusing too much on greater budget cuts, for not implementing policies fostering economic recovery and for not adopting greater redistribution taxation, which would increase revenue. Finally, the radical Catalan independence MPs denounced Catalonia’s fiscal plundering.

The Catalan Government presented its third budget adjustment plan, which represents a reduction of €1.5 billion. The plan includes the Spanish Government’s measures to reduce public spending in healthcare, primary and secondary education, and universities, all managed exclusively by the Autonomous Communities, and thus in Catalonia by the Catalan Government. However, these measures will only represent saving €150 million, only 10% of the quantity announced by the respective Spanish Ministers.

An additional 5% public employee salary reduction

The rest of the measures correspond to decisions taken by the Catalan Government, such as reducing public employee salaries by 5% this year. The measure confirms the 3% reduction to be implemented in June and announced in February. Furthermore, it adds an additional 2% drop in December, which had only been presented as a possibility until now. In addition, the measure is to be added to the 15% reduction of temporary staff working hours and the corresponding share of their salaries. Furthermore, all public salaries had already been reduced by 5% upon a decision taken by the previous Spanish Government in 2010. The Catalan President underlined on Tuesday that while Catalonia further reduces public salaries, such measures are not adopted in the rest of Spain. The Spanish Prime Minister Mariano Rajoy already said he was not reducing the salaries of the Spanish Government’s employees.

Less money for public companies

Artur Mas confirmed a “significant reduction” of the money transfers to public companies depending on the Catalan Government. In addition he admitted that it will represent a restructuring of some companies, including staff, which might cause lay offs. Mas explained that, due to the recession and the decrease in funds, some public companies have reduced their activity and therefore do not need the same amount of workers. However, he stated that “mass lay offs will be a red line” not to be crossed.

Less public subsidies

Another measure adopted by the Catalan Government to reduce public spending will be a decrease in public subsidies. The subsidies will not be reduced at the same levels, allowing priority setting. The subsidy reduction will be implemented in the non-initiated tenders. In fact, for the time being, all new tenders and competitions have been suspended waiting for the different Ministries to decide, together with the Catalan Finance Ministry, the exact impact of the measure in each possible subsidy.

Investments to be delayed

In addition, many investments will be slowed down and rescheduled. The objective is to renegotiate payments whenever possible in exchange for slowing down works, in order to delay payments and reduce those to be made this year and next.

Selling public assets

The Catalan Government will continue with its policy to sell public buildings, an initiative that last year was already in place. However, the Government did not find buyers willing to pay the price requested. Now, some public companies will also be sold. The Catalan Government’s highways, managed by the public company Tabasa, will be privatised, as well as ‘Aigües Ter-Llobregat’ (ATLL), the water company supplying water to Girona and the North of Barcelona Metropolitan Area.

Tuition fees for higher vocational training and chronic patients out of the main hospitals

Regarding Education, the Catalan Government will introduce “modest tuition fees” for higher vocational training, which is not obligatory and was offered for free until the current time. This way, vocational training students will also contribute to fund part of their studies, as university students do. They have also seen their tuition fees increased. However, Mas pointed out that grants will also be increased and thus “nobody will not go to university for economic reasons”.

In addition, the cooperation between the Catalan Healthcare System and social welfare networks will be increased. Chronically ill patients will be transferred to social centres with medical centres and asylums, in order to free up space and services in the main hospitals.

Implementing the Spanish Government’s measures on healthcare and education

The Catalan Government will implement the pack of measures on healthcare and education approved by the Spanish Government. However, it reminded that according to their calculations, they will only save €150 million, which represent 10% of the amount of money announced by Rajoy’s Cabinet. The Catalan President stated that the rate of pupils per classroom will not be increased beyond 20%.

The Catalan President blames the Spanish Government

Artur Mas blamed the Spanish Government for not paying the money it owes and for imposing a fiscal deficit of some 8.5% of Catalonia’s GDP every year. The Catalan President said the Spanish Government was responsible for being now obliged to implement a third austerity plan, as “it has not paid its debts with Catalonia” but instead it has money to fund infrastructure such as high-speed trains throughout Spain. Mas asked the Spanish Government to stop teaching lessons and start reducing public salaries and stopping non-priority investments. He also reminded that if the Spanish Government had paid last year as it was legally obliged and announced the €759 million corresponding to funding Catalan infrastructure, now the Catalan Government would only have to cut half of the €1.5 billion. In addition, he also blamed the European Union for not reviewing Spain’s deficit targets and not adjusting them to the real economic cycles, taking into account the current recession. Mas reminded that the Catalan Government defends “austerity” as a value, but not in mad way that forgets about the sustainability of public services and economic growth.

The opposition criticises the plan

The opposition parties have criticised the Catalan Government’s third austerity plan. They have all coincided to indicate that the plan was presented without budget figures, and thus the real impact of each individual measure was unknown. In addition, many doubted the plan would actually save €1.5 billion. In addition, they all asked Artur Mas to discuss the plan at the Catalan Parliament. However, each party had individual remarks.

The main opposition party, the Catalan Socialist Party (PSC) criticised the lack of data while presenting the plan. “No transparency, no credibility, and no trust” were the words used by the PSC leader at the Catalan Parliament, Joaquim Nadal, to define Mas’ presentation. In addition he added that the plan will not end with the “citizen fear”, caused by the “serious economic situation”. Earlier, the PSC Secretary General, Pere Navarro, lamented that Mas was following “Merkel’s orthodoxy”, based on austerity measures but without fostering growth.

The Conservative People’s Party (PP), which runs the Spanish Government, criticised Mas for blaming Spain’s Prime Minister Mariano Rajoy. The PP’s Spokesperson, Enric Millo, especially criticised Mas for saying that Madrid was “centrifuging” its deficit to the Autonomies. Millo asked Mas to be more sensible and he emphasised that the Spanish Government has been offering tools to the Catalan Government to balance its budget.

The leader of the Catalan Green Socialist and Communist Coalition (ICV-EUiA), Joan Herrera, accused Mas of continuing cutting public services and benefiting private interests. He was especially critical of the privatisation of the water company ATLL and highways enterprise Tabasa. Herrera also criticised Mas for obeying Madrid, Brussels and the markets and focusing too much on austerity, instead of working on increasing revenues, implementing redistribution taxes, and ensuring social cohesion.

The Left-Wing Catalan Independence Party (ERC) stated that Mas’ third plan “puts the country back in the 1980s”, with budget cuts that “actually have an effect on basic services”. ERC’s Spokesperson, Anna Simó, criticised Mas for not saying enough to the Spanish Government. She asked Mas to push for a “unilateral fiscal independence”, approving a law that creates Catalonia’s own treasury, with an agency collecting all the taxes.

Finally, the minority parties also criticised Mas. The radical Catalan independence MPs reminded the “fiscal plundering” Catalonia suffers and asked Mas to call for elections and include Catalan independence on CiU’s programme. On the contrary the populist Anti-Catalan Nationalism MPs accused the Catalan Government of being weak in front of economic powers and implementing budget cuts that hurt the middle class.