The Spanish Budget for 2012 violates approved laws regarding investment in Catalonia

Barcelona (ACN).- On Tuesday, the Spanish Government presented details of its budget proposal for the current year, and direct investment in Catalonia drops by 45% compared to 2011. Not only does Catalonia become the Autonomous Community with the largest decrease in regional spending compared with the rest; in addition, its legally approved funding scheme is violated. The Spanish Government has presented a budget for 2012 that does not respect the current legislation in place regarding territorial fiscal redistribution, approved by the Spanish Parliament, by a binding referendum voted by the Catalan people, and validated by the Spanish Constitutional Court in 2010. Out of all spending planned over 2012 throughout Spain, 11.1% will be spent in Catalonia. However, current legislation clearly states that, in order to compensate for a lack of investment for decades, the Spanish Government is legally obliged to spend at least Catalonia’s weight within the Spanish economy. In 2012, Catalonia’s GDP represents 18.7% of the total. However, the Spanish Government only plans to invest 11.1%, which is 41% less than what it should be. The Spanish Minister for Finance, Cristóbal Montoro, justified the decision by saying that “the Government is not being held hostage by any one”, referring to the previously approved legislation. Planned investment in Catalonia totals €1.4 billion, a drop of 44.9% in relation to the previous year. Furthermore, the 2012 budget does not include funds pending to be transferred to the Catalan Government from 2008 and 2009, which total €978 million.

On Tuesday the Spanish Government finally presented its budget proposal for 2012. The reason for the delay was mainly due to the Spanish general elections that were held in November. The new Cabinet took office at Christmas and waited three months to present the budget, despite the pressure and the urgency required by the European Commission and the rest of the EU Member States. The opposition criticised the Spanish Government for waiting for Andalusia’s and Asturias’ regional elections to pass, which were held on March 25^th. However, the Government has repeatedly denied the accusations, claiming that 3 months is a reasonable time to prepare for a state budget.

A total spending reduction of 9.6%

This year’s budget reduces the Spanish Government’s total spending by 9.6%, with the priority being to meet the 5.3% deficit objective imposed by the European Union. Montoro summarised the budget: “Firstly the deficit, secondly the deficit and thirdly the deficit”. The 2012 budget foresees an adjustment of €27 billion, based on drastically reducing spending and eliminating deductions regarding Corporate Tax and maintaining increases in Personal Income Tax decreed in late December and the VAT increase approved by the previous Spanish Government and in place since July 2011. Furthermore, many fees are increased, as well as secondary taxes, such as that on tobacco.

The spending reduction varies depending on the ministry and the programme. For instance, spending in infrastructure drops by 22%, while that in civil R+D+I decreases by 25%, in the Spanish Crown by 2% and in unemployment subsidies by 5.5%, despite reaching an historical unemployment record this year. In 2012 the Spanish Government plans to spend €28.805 billion on unemployment subsidies, while it will spend €28.876 billion paying for debt interests, which is even higher than the €27.34 billion spent to pay the Spanish Government’s civil servants.

Catalonia, the Autonomous Community with the largest investment drop

Where is the money spent? Regional direct investment, which totals €12.70 billion in 2012 experiences a sharp drop from  2011, when it totalled €16.77 billion. Catalonia is the Autonomous Community that takes the worst hit. Direct investment made in Catalonia drops by 44.9% in relation to the previous year, totalling €1.403 billion.

The Spanish budget violates the laws in place regarding investment in Catalonia

Furthermore, the Spanish Government has decided not to respect the current legislation presenting this budget proposal, ignoring the Catalan Statute of Autonomy (Catalonia’s main law) approved by the Spanish Parliament (2006), by the Catalan people through a binding referendum (2006), and validated by the Spanish Constitutional Court (2010). The current legislation clearly states that the Spanish Government is legally obliged to spend at least the equivalent of Catalonia’s weight within Spain out of its overall regional spending. The reason behind this legal measure is to compensate for an historical lack of investment made in Catalonia and sustained over the years, which was recognised by law. Therefore, according to the legislation in place, the Spanish Government should have spent at least 18.7% of its regional spending, corresponding to the weight of Catalan GDP in Spain’s economy in 2012. Nonetheless, the Spanish Government plans to spend 11.1%, a figure that corresponds only to 59% of what it should have spent in relation to the rest of the territories. Asked about the question, the Spanish Finance Minister simply said that “the Government is not being held hostage  by anyone”, referring to previous legislation.  

The Spanish Government has also refused to include funds pending in Catalonia since 2008 and 2009. They correspond to an additional provision to directly compensate for the historical lack of investment made in Catalonia, therefore being also part of Spain’s territorial fiscal scheme. The Spanish Government owes the Catalan Executive €759 million from 2008 and €219 from 2009. The first amount had already been included by the previous Spanish Government in its budget for 2011, but despite many promises, the money was never paid. The current Spanish Government has not included this debt in the 2012 budget. Both amounts together almost total €1 billion. The Catalan Government might have to meet its deficit objective without this money, as was the case last year. It must be noted that the current Spanish Prime Minister, Mariano Rajoy, criticised the previous Spanish Government for not paying Catalonia the €759 million from 2008; it was last year, when Rajoy was still the Opposition Leader.