The Catalan Government’s budget for 2011 will have around a 2% deficit and will increase the share for healthcare, education and social services

Barcelona (ACN).- The Catalan Minister for Finance, Professor Andreu Mas-Colell unveiled this Friday the main guidelines for the 2011 budget. Catalonia will not meet the 1.3% public deficit objective for 2011 without the money from the Competitiveness Fund owed by the Spanish Government, which according to Mas-Colell totals 1.45 billion euros. The Catalan Minister stated that in the current climate, Catalonia will have a public deficit higher than 2% of its GDP in 2011, corresponding to some 2.3 billion euros. He could not give a precise figure as the budget is still being drafted. Mas-Colell said that he refuses to include the Competitiveness Fund’s 1.45 billion euros as pending revenue, as the budget will not have “any ghost item”. In addition, he said that Catalonia will meet its deficit objective in 2012, 2013 and 2014. The Spanish Government reacted quickly and warned Mas-Colell that the deficit objective for 2011 has to be met and that the issue “is not questionable”. However, apparently, they still deny paying the money that would allow Catalonia to meet the 1.3% deficit objective, because of the lack of money from the Competitiveness Fund. The Catalan Minister for Finance did not go into great detail explaining the different items of the budget. However, he explained the main guidelines. Mas-Colell stated public expenditure will be reduced by 10%, although the reduction will not be “lineal”. Healthcare, education and social services will see their total amount reduced by less than 10%. The result will be that the share of these three areas combined will be increased from 67% in 2010 to 70% in 2011. The Catalan Government appears to have reacted to the public sector protests in the last number of weeks, especially among health professionals. Opposition parties in Catalonia demanded greater investment (such as ICV-EuiA) or share (such PPC) regarding social policies. The PSC criticised the announcement regards not meeting the 1.3% deficit objective.

The new Catalan Government, which took office at Christmas, has as its first priority approving the budget for 2011, which has to reduce the 2010 public deficit (set at 3.86%), as well as kick starting the economic recovery and guaranteeing the Welfare State. The President of the Catalan Government and leader of the Centre-Right Catalan Nationalist coalition (CiU), Artur Mas, chose for this task an experienced and world-recognised economist, former Harvard Professor Andreu Mas-Colell. Mas-Colell already presented at the end of January an austerity and stability plan which was cutting public expenditure overall by 10%. He has also been negotiating with the Spanish Government over the number of months the plan’s approval and getting all the revenue to which Catalonia is entitled to and which the Spanish Government is obliged to  pay. Although the negotiations are continuing and the plan has not yet been approved. Time is pressing and Mas-Colell presented on Friday the main guidelines of the Catalan Government’s budget for 2011.

A 2% deficit for 2011 and meeting the deficit objective in 2012, 2013 and 2014

The Catalan Minister for Finance was very clear. While the Spanish Government continues to refuse paying the 1.45 billion euros of the Competitiveness Fund at the moment, the Catalan Government will not meet the 1.3% deficit objective for 2011. Mas-Colell said that in the current circumstances the Catalan budget will have a deficit a bit higher than 2%. He explained he could not give a precise figure yet as the budget is still being drafted. However, he wanted to stress that if the Spanish Government were to pay the 1.45 billion euros of the Competitiveness Fund, the deficit objective would be met. The Minister clarified that this amount had not been included at all, not even as pending revenue, as Mas-Colell does not want any “ghost item” in the budget. Mas-Colell also justified not meeting the deficit criteria in 2011 by saying it “is a transition year” between two governments, with a budget that was pending and not approved before last November’s elections. Mas-Colell insisted that the deficit objective will be met in 2012, 2013 and 2014. He also stressed the “austerity, seriousness and credibility” of the budget he is preparing, with a total public expenditure reduction of 10%.

A few hours later, after the weekly Spanish Government cabinet meeting, the first Vice President Alfredo Pérez Rubalcaba warned Mas-Colell that not meeting the deficit objective for 2011 is not an option, “the 1.3% deficit objective cannot be questioned” he said, while he suggested the Catalan parties to focus on negotiating revenues and the expenditures. Paradoxically, the Spanish Ministry of Finance is apparently refusing to discuss the main item that would allow the Catalan Government to meet the deficit objective for 2011, the Competitiveness Fund money.

70% of the budget is for healthcare, education and social services

Public expenditure will decrease in 2011, also in healthcare, education and social services. However, in these last areas it will at a lower level compared to other policies and investments. The Government’s will is not to put social and care policies at risk in times of crisis, although trade unions, some professional associations and opposition parties think the centre-right government is already putting these areas in jeopardy.

The Catalan Government wants to stress that despite a total reduction in public expenditure, the total share for healthcare, education and social services will correspond to 70% of the budget, explained Mas-Colell. This means a proportional increase compared to the 2010 budget, despite decreasing the absolute amount. In 2010, these areas corresponded to 67% of the budget.

Opposition parties in Catalonia push for social policies

Left-wing to right-wing opposition parties have asked for a greater importance for social policies in the 2011 budget, although with nuances. The main opposition party, the Catalan Socialist Party (PSC), said that not meeting the 1.3% deficit is a danger, in line with the Spanish Government. The Conservative People’s Party (PP) asked for the healthcare, education and social policy share to be 75% and not 70%. In the opposite political spectrum, the Catalan Green Socialist Party (ICV-EUiA) denounced what they judge to be the excessive reduction in social policies and therefore they have asked for greater investment in those areas. Finally, the Left-Wing Catalan Independence Party (ERC) celebrated the “good intentions” to set a 70% share for social policies but pointed out that the Spanish Government has to give more money to Catalonia.