The Spanish Prime Minister and the Catalan President secretly met and agreed to relax the deficit targets

Barcelona (ACN).- On Wednesday it became known that the Spanish Prime Minister, Mariano Rajoy, and the President of the Catalan Executive, Artur Mas, secretly met this week in Madrid. It is the first time they have held a meeting in the last 6 months, since September’s encounter when Rajoy rejected discussing a specific economic agreement for Catalonia. The meeting is in line with the new attitude of both governments to increase dialogue and explore ways to solve the most pressing matters. According to Catalan and Spanish Government sources, in the recent meeting Rajoy and Mas mainly talked about the deficit targets for 2013 and Catalonia’s self-determination process. Regarding Catalonia’s hypothetical independence from Spain, they see things very differently and Rajoy continues to refuse to allow any kind of self-determination vote, while Mas would like it to happen next year. Nonetheless, they decided to keep an overall civilised attitude towards this issue, in order not to interfere in other matters. On the fiscal issues, both of them found some points of mutual understanding. They agreed on the need to relax the current 0.7% deficit objective for Catalonia, which would oblige the Catalan Executive to carry out a budget adjustment of almost €4.5 billion in a context of economic recession. They did not set any specific deficit objective, as it will also depend on how much the European Union relaxes Spain’s total deficit. However, Mas would like it to be in line with the Catalan Government’s spending responsibilities and therefore be more than a third of the global deficit target allowed to Spain. With the current 4.5%, Mas would like the Catalan Executive’s deficit target to be 1.5% of Catalonia’s GDP. However, if Brussels finally allows a total deficit of around 6%, Mas would like the Catalan Government to have a 2% deficit objective for 2013.

Unfreezing the relationship between Madrid and Barcelona

This meeting was the first one after Artur Mas’ inauguration of his second term in office at Christmas and after the meeting they both shared last September in Madrid, when Mas proposed a specific economic agreement for Catalonia and Rajoy rejected it. However, they saw each other at some unveiling ceremonies although they only exchanged some courtesy words – such as during the High-Speed Train line linking Barcelona and France via Girona and Figueres. This week’s meeting seems to be in line with the unfreezing process that started a few days ago between both governments in order to at least talk and try to solve the most pressing issues, considering the extremely delicate situation of public finances and the economic recession.

The massive Catalan independence demonstration was a milestone

The situation gradually became more tense over 2012, when the Spanish Government started to pass laws recentralising powers and announced initiatives against the Catalan language. However, the clearest milestone was the 1.5-million strong demonstration in Barcelona supporting Catalonia’s independence from Spain, on Catalonia’s National Day (11^th of September, 2012). Mas backed it “at a personal level” and the party he leads – the Centre Right Catalan Nationalist Coalition (CiU) – also supported it. Furthermore, the Catalan President also put himself at the forefront of Catalan nationalist claims. After the demonstration, and with the atmosphere already very tense, Mas proposed to the Spanish Government a specific economic agreement for Catalonia but Rajoy refused to even talk about it. In response, Mas called for elections asking for an “exceptional majority” to lead the self-determination process. Meanwhile, the Spanish Government and Spanish Nationalism started an offensive against Catalonia’s self-determination process on many fronts, including the economic asphyxiation of the Catalan Executive and dirty tricks interfering with November’s electoral process. Six months after the independence demonstration both governments are trying to re-build bonds and re-establish a climate enabling negotiation and problem-solving.

Continuing with fiscal consolidation efforts

During this week’s meeting, Rajoy and Mas talked about the economic situation in Catalonia, Spain and Europe, and they both agreed on the need to continue with the fiscal consolidation efforts. They celebrated the reduction of the Catalan Government’s deficit over 2012, dropping from a 4.02% deficit by the end of 2011 to a 1.96% by the end of December. This represents a reduction of more than two percentage points in only one year.

In addition, they also discussed the Catalan Government’s lack of liquidity due to the closed access to international markets. They have assessed the functioning of the Liquidity Fund for the Autonomous Communities (FLA), which is the Spanish Government’s mechanism of loans to provide them with liquidity. Both of them agreed on the need to repeat the implementation of mechanisms guaranteeing liquidity. In addition, they also agreed on the need to implement policies fostering economic growth and facilitate credit to private companies.