austerity measures

The Catalan Government will adjust its budget by €4.295 billion in 2012, through spend cuts of €2.680 billion and increasing revenue by €1.615 billion. With this plan, the Catalan Government will meet the 1.5% deficit target. The Council of Fiscal and Financial Policy (CPFF), which brings together the Spanish Government and the 17 Autonomies, has approved Catalonia’s budget adjustment plan for 2012-2014. The Spanish Government would pay part of the money owed, but not all of it. The Catalan Government has included a plan B in case the Spanish Government does not honour its fiscal obligations towards Catalonia.

The third plan represents an additional budget cut of €1.5 billion, in order to meet the 1.5% deficit target for this year. The President of the Catalan Government, Artur Mas, said that the plan “guarantees essential services”. He also stated that if the Spanish Government had paid what it owed last year, the current reduction would be halved. The plan decreases budget allocations for public companies, reduces public employee salaries once again, decreases the amount allocated for subsidies, delays investments, privatises some public companies, sells public buildings, and implements the measures decided by the Spanish Government regarding health and education. The opposition criticised the plan for not being concrete and effective enough.

The Catalan Parliament has approved Catalonia’s Law of Budget Stability, which is more restrictive than its Spanish equivalent. The Catalan law reduces the adaptation time set in Spanish law by 2 years. Furthermore, it sets a 0% deficit for 2020. The law has been approved with the votes of the Centre-Right Catalan Nationalist Coalition (CiU), which runs the Catalan Government, and the Conservative People’s Party (PP), which runs the Spanish Executive. Left-Wing parties have voted against the measure; according to them it follows the “0% deficit dogma” and forgets about “necessary” social spending.

The Catalan Government has announced a plan against the Spanish Government’s “recentralisation offensive”. One of its actions is taking the education and healthcare reforms adopted by Madrid to the Catalan Council for Constitutional Guarantees, as a first step to bring them to Spain’s Constitutional Court. The Catalan Government believes that some of the measures invade its jurisdiction, as it directly manages education and healthcare. Another measure is issuing a report pointing out the Spanish Government’s duplicities, such as maintaining ministries such as education, healthcare and culture. These policies are managed by the Autonomies. Left-Wing opposition parties have urged the Catalan Government to take further measures, while the PP has accused the Catalan Executive of “lying”.

Coinciding with the European Central Bank Governing Council organised in Barcelona, the President of the Catalan Government, Artur Mas, met with Mario Draghi and other members of the ECB Governing Council. Mas took the opportunity to explain to the ECB the Catalan Government’s austerity measures and its efforts to reduce Catalonia’s public deficit. He also spoke of his party’s support to all the reforms taken at Spanish level, despite being unpopular. However, Mas warned the ECB President that reducing the deficit too fast in the middle of an economic recession might worsen the crisis.

The Dutch newspaper NRC Handelsblad has published an interview with the President of the Catalan Government, Artur Mas. Mas states that “Catalonia’s intervention by Spain would be unthinkable” and “unfair, as no government has done as much as Catalonia's to adjust the economic situation”. Furthermore, he adds that “people’s reaction [against such an intervention] would be very strong”. NRC explains the austerity measures implemented by the Catalan Government to reduce its deficit, such as the drug prescription fee or public employee salary reduction. Furthermore, Mas complained that Spain’s Autonomies model has “decentralised spending but not revenue”; “we want to collect our taxes”, he affirmed, being another “state within a federal Europe”, contributing to regional solidarity.

The day after the Spanish Government imposed increasing the price citizens pay for medication, the Spokesperson for the Catalan Government confirmed that Catalonia will maintain the €1 drug prescription fee. The Catalan Health Minister had said earlier they would study if the drug prescription fee would be implemented. The main doctors union and Left-Wing opposition parties asked the Catalan Government to eliminate the drug prescription fee, because it would make Catalan citizens pay more for their medication than the rest of Spanish citizens.

The Spanish Minister of Health met with her counterparts from the Autonomous Communities to discuss measures to reduce healthcare spending by €7 billion. Pensioners will have to pay for 10% of their medication, with a maximum of between €8 and €18 per month depending on their income. Furthermore, people with a job will have to pay for 40% to 60% of the price, depending on their income. Besides, the number of pills will better adapt to prescriptions, drug purchases will be centralised and generic drug prescriptions will be fostered. Catalonia might not eliminate the drug prescription fee although the final decision will be taken once the impact of measures is fully studied. The Catalan Minister also emphasised that the main problem in Catalonia is “the system’s funding” and not expenditure, which cannot be further reduced.

The Catalan Government has drafted a plan regarding public employees for the 2012-2014 period. The aim is to reduce public spending in order to meet the deficit targets by reorganising civil servants, including their working conditions. The plan foresees the possibility of a reduction in salaries and working hours, as well as making their working conditions, tasks, and location more flexible. 6,800 temporary workers will have their hours reduced by 15% from April 1st. Unions have criticised the plan. However, the Catalan Vice President has asked unions to avoid exaggerating the issue and creating problems.

There has been a unanimous call in Catalonia for greater flexibility of the deficit objectives applied to the Autonomous Communities for the current year. Every political party in Catalonia, including the People’s Party (PP), has asked the Spanish Government to provide more flexibility to the Autonomies, which manage 40% of Spain’s public spending and run basic Welfare State services. The Spanish Government has set a new deficit target of 5.8% of Spain’s GDP for 2012; internally, the Central Government allowed itself a deficit of 4% and ordered the Autonomies to commit to a deficit of 1.5%. Some Catalan parties have said that the Spanish Government has double standards.

The Spanish Government stressed that no Autonomous Government will be left disappointed if they have a “responsible” attitude and have an austerity plan in place. However, those failing these measures could be intervened the same way “the European Union” has done with countries such as Greece and Ireland, but without “having their powers taken away”, clarified the Spanish Finance Minister, Cristóbal Montoro. The Autonomous Community governments have renewed their 1.3% deficit objective for 2012 and the Spanish Government has offered additional tools to raise funds and solve liquidity issues. The Catalan Finance Minister, Andreu Mas-Colell, has met bilaterally with Montoro to foster cooperation and discuss the Catalan Government’s claims about the €2.2 billion the Spanish Government owes Catalonia.

The Financial Times has published an interview with the President of the Catalan Government, Artur Mas. The Financial Times stressed Mas’ request for a new deal between Spain and Catalonia, which would reduce Catalonia’s contributions to the rest of Spain by half. The FT explained that between 8% and 9% of the annual Catalan GDP, which represents between €17 billion and €18 billion per year, goes to the rest of Spain to pay for solidarity funds for poorer regions. The newspaper also praised the “pioneering” austerity measures implemented by the Catalan Government.

Catalonia already approved its own spending limit through a law of its own last September. The Spanish Vice President, Soraya Sáenz de Santamaría, explained that the new Budget Stability and Sustainability Law will introduce “mechanism corrections” and “almost automatic” sanctions for public administrations that do not meet the deficit objectives. In addition, before approving their budget, the Autonomies and large city town councils will have to commit to a spending limit and present detailed reports on several aspects of the budget. However, she stressed that each autonomous government will have the freedom to allocate resources.

The Catalan President, Artur Mas, has met with the UK Deputy Prime Minister, Nick Clegg at a summit of European Liberal leaders. He stressed that Catalonia is doing “its homework” despite the excessive and “continuous fiscal drainage” from the Spanish State, which “is unprecedented in Europe”. “European leaders must understand” Catalonia’s situation, Mas said. “We need to explain ourselves” […] “because otherwise the only image that is received abroad is distorted”. He also explained that Catalonia’s GDP is the size of Portugal’s and Finland’s, and has an export level similar to Denmark. Mas also criticised Rajoy’s recent tax increase.

Artur Mas, President of the Catalan Government, has reflected on his first year in office. Mas justified the budget cuts his government has made in order to avoid “a collapse” in public services. He also criticised the recent trend of patronising the Autonomous Communities and claiming that they are responsible for Spain’s financial problems. That, he believes, has made them scapegoats. “The Autonomies are a very important part of the State”, “they provide almost all public services to citizens”, he stressed. In addition, Mas insisted that Spain’s debt and deficit is mainly due to the Spanish Government’s overspending over many years and not the fault of the Autonomies or the municipalities.