The Spanish Government will relax the Autonomous Communities’ deficit targets and is open to setting them on individual basis

Barcelona (ACN).- On Thursday evening, the Spanish Finance Minister, Crístobal Montoro, confirmed that the deficit targets imposed on the Autonomous Communities’ governments for 2013 will be relaxed if the European Union does with the same for Spain. Montoro made this announcement after having met with all the regional finance ministers in the Fiscal and Financial Policy Council (CPFF). Despite compromising by relaxing the deficit objectives, this Thursday’s CPFF did not discuss the new deficit targets, according to Montoro. A working group will be created to analyse the most convenient formula for this, without ruling out the possibility of setting different deficit targets for each Autonomous Community, as the European Union does for each Member State. The working group which will carry out its assignment “quickly”, Montoro said. On Wednesday, the Catalan Finance Minister, Andreu Mas-Colell, proposed that deficit targets could be set according to the debt levels and therefore be different for each Autonomous Community. On Thursday evening, the Catalan Government celebrated Montoro’s announcement that he would relax the Communities’ deficit objectives, since it has been asking for this for the last few months. Mas-Colell stated that he will look for “a smooth relationship” with the Spanish Executive to negotiate the formula details and the final deficit targets for Catalonia.

The Catalan Government’s offer to talk about the issues

This is in line with the Catalan Government’s new approach, which is to have an open and constructive attitude towards negotiations with the Spanish Executive on the most important subjects on the table in order to solve them. In the last few days, the Catalan Government has sent several messages to this end, aiming to solve several urgent economic matters or at least to explore all the ways of looking at the problems until all the possible ways are exhausted. This strategy also includes Catalonia’s self-determination vote, asked for by a large majority of the Catalan Parliament and completely refused by the Spanish Government until the present day.

A working group created to study the current fiscal scheme

Catalonia has also been asking for a specific economic agreement with Spain, guaranteeing a fairer fiscal redistribution for Catalan citizens and more resources for the under-budgeted Catalan Government. This issue is crucial to understanding the current relations between Catalonia and Spain, as the Spanish Government refused to even discuss about it six months ago. However, today Montoro announced the creation of a working group to analyse the current system in order to decide later on whether it will be modified. Despite the insistence of some governments, including Catalonia’s, this group will not work on a new fiscal scheme but it will only make an assessment of it, because some Communities do not want to change the current system, as Montoro emphasised.

The Autonomous Communities fulfilled more than 90% of the plan to reduce public companies

A third working group has been created to analyse the reformation of the public sector and eliminate duplicities and administrative obstacles. In the last year, the Spanish Government has insisted on the duplicities of services and bodies existing in Spain. However, it tended to ignore its own duplicities such as the Spanish Ministries of Health, Education and Culture, which exist despite the Autonomous Communities exclusively managing public healthcare and education in Spain, along with most of the museums, heritage sites and cultural industry policies. Despite this, the Spanish Executive obliged the Autonomous Communities to issue a plan to eliminate some of the public companies they created. Montoro recognised that “more than 90% of the public companies” planned to be eliminated have already effectively disappeared.

Catalonia proposed that the Autonomous Communities’ deficits targets are a third of Spain’s

The Catalan Finance Minister proposed months ago that instead of being 15% of the deficit that has been allowed by Brussels, the deficit targets for the Autonomous Communities should correspond to their spending responsibilities and therefore be at least 33% of that allowed to Spain. Since the EU is currently allowing a 4.5% deficit for 2013 – although this figure is very likely to be relaxed by Brussels –, this would mean that the Communities’ deficit objective should be 1.5% according to Mas-Colell. In this vein, if in the end Brussels allows Spain a deficit of 6% for 2013, the Autonomous Communities should be granted at least a 2% objective.

Mas-Colell proposed the setting of asymmetric targets in relation to the debt levels

Moreover, on Wednesday the Catalan Minister proposed the formula of setting asymmetric deficit targets, different for each Community, as the EU does for each Member State. Additionally, he suggested that they could be set in relation to the debt levels since the financial interest to pay differs each year. According to Montoro, this possibility is not ruled out and will be studied by the working group. The Spanish Minister particularly emphasised that this working group will carry out its tasks very quickly. In addition, he stated that it was positive that the different governments expressed their views on the matter.

The Autonomous Communities were only allowed 15% of Spain’s public deficit despite them representing 36% of the public spending

Currently, the deficit target for Spain’s Autonomous Communities is set at 0.7% for all of them, corresponding to 15% of the deficit allowed by the European Union to the entire Spanish public sector. However, the Communities represent in total around 36% of Spain’s public spending and they exclusively manage the basic Welfare State services such as healthcare and education. Furthermore, some governments, including Catalonia’s, proportionally manage a larger share since they have more devolved powers, such as police, prisons, short-distance trains, etc. In the last few months, the Catalan Government has been leading a campaign to relax the 0.7% deficit target for 2013, as it judged it to be “impossible” to reach them without “totally dismantling” the basic public services.