budget cuts

A month ago, the Catalan Government issued a preliminary deficit figure for last year of 2.3%. Now, the Catalan Finance Minister, Andreu Mas-Colell, has corrected this and issued “a more precise figure, although not definitive yet”, which represents having undertaken an adjustment of €3.3 billion in a single year. The Catalan Government was supposed to meet a deficit target of 1.5% in 2012, a figure imposed by the Spanish Executive and considered too strict by Mas-Colell, since it is not proportional to the Catalan Executive’s share of public spending. For 2013, the Spanish Government is imposing an even stricter 0.7% deficit target. Mas-Colell has been repeating that it is “irrational” and needs to be changed.

The Catalan Executive has provided details of how it will adjust €4 billion of its 2013 budget in order to meet the deficit target imposed by the Spanish Government. Besides the 1 billion tax increase already announced, the Catalan Executive will have to implement further budget cuts. On Thursday it will present its austerity plan for 2013 to the unions, which will affect all public employees, in order to save €700 million. As last year, public employees will not receive 7% of their annual salary, corresponding to part of the summer and Christmas bonuses. According to the unions, 3,000 civil servant posts will remain empty and 10,000 substitution contracts will not be signed.

The President of the Catalan Government, Artur Mas, and the King of Spain, Juan Carlos I, met on Thursday for the first time since Mas was re-elected president and the Catalan Parliament approved a Declaration of Sovereignty of the People of Catalonia. The meeting lasted 45 minutes and none of the participants officially commented afterwards. However, Mas, once in Barcelona, referred to it during a literary prize ceremony. The Catalan President underlined that “we will always have to go and explain ourselves” regarding Catalonia’s self-determination process. According to him, this proves Catalonia’s “willingness to always talk”. Besides, Mas also explained to the monarch that the current deficit targets imposed on the Autonomous Communities are not allowing them to guarantee the Welfare State.

Andreu Mas-Colell, the Catalan Finance Minister, has sent a letter to the European Commissioner for Economic and Monetary Affairs, Olli Rehn, to denounce the fact that the Spanish Government is proportionally imposing much stricter deficit target on the Autonomous Communities than that of the Spanish Executive, obliging them to implement a much larger and faster adjustment. In 2013, the Spanish Government allowed itself a 3.8% deficit target and imposed an objective of 0.7% on the Autonomous Communities. In Spain regional governments manage 36% of the total public spending, including the main public services such as healthcare, education and social affairs. The Catalan Government manages an even larger share, as it has more devolved powers.

The Catalan Government has been insisting on the need to internally redistribute deficit objectives in Spain, splitting them in a fairer way in order to better pair the responsibility of the management of basic services with their share of Spain’s total deficit target. Currently, the Spanish Government is keeping most of the deficit allowed by the European Union for itself, despite the fact that it only represents 50% of Spain’s total public spending, and it has forced regional and local governments to a Draconian budget adjustment. The European Parliament asked EU Member States to internally split deficit targets in a fair way for the benefit of the public services aimed at the citizens. Now, the Spanish Ministry for the Economy, Luis de Guindos, talked about distributing deficit targets “equitably”, in front of the European Commissioner for Monetary Affairs, Olli Rehn.

Despite having a balanced budget in 2012, the National Theatre of Catalonia has decided to close the most alternative auditorium of the three it has since it will have smaller funds in 2013. The theatre expects a reduction in the occupancy rate due to the economic recession and therefore selling fewer tickets, resulting in a 28% reduction in its own resources. The institution has readjusted the 2012/2013 season by cancelling the spectacle ‘Panorama’ by Philippe Decouflé and by eliminating 70 performances of other plays in the other theatre rooms.

If the Spanish Government had honoured its legal commitments and did not “centrifuge the deficit” towards the Autonomous Communities, the Catalan Government would have ended 2012 with a deficit of 1.53%, according to the Catalan Finance Minister, Andreu Mas-Colell. Instead, the Catalan Government had a deficit of 2.3%, 0.8 percentage points higher than the 1.5% deficit target. In any case, Catalonia’s deficit still decreased from 3.99% in 2011 to 2.3% last year, a reduction representing €3.48 billion, despite the recession, the consequent drop in tax collection and paying €1.72 billion in debt interest. In the last 2 years, the Catalan Government has reduced its expenditure by €4.2 billion, representing a daily reduction of €5.7 million.

The Spanish Government is keeping most of the 4.5% public deficit allowed to the entire Spanish public sector in 2013 for itself, despite managing only 50% of the total public spending. It has allowed itself a 3.8% deficit while it has imposed a 0.7% target on the regional governments, which manage almost 40% of the public spending including basic services such as healthcare and education. The European Parliament report indirectly asks Madrid to relax the Autonomous Communities’ deficit targets according to the basic services they provide. In addition, it also states that regional governments should have greater fiscal capacities and depend less on central government transfers. Furthermore, the report asks “some member states” to eliminate the ministries whose powers have been devolved and to “reduce unnecessary defence expenditures”.

The Constitutional Court has accepted the Spanish Government’s appeal against three measures adopted by the Catalan Executive to reduce its deficit, some of them negotiated last spring with the People’s Party (PP). The Spanish Government, which is run by the PP, now believes that these measures invade its own powers, “break market unity” and go against the principle of “equality for all Spaniards”. While accepting the appeal, the Court has temporarily suspended the application of the fees and taxes for a five-month period, which could be extended. The Catalan Government will appeal the decision as it believes the measures to be in line with the Constitution and within its jurisdiction. The drug prescription fee brought in €46 million in its first 6 months and it reduced public spending on medicines.

Catalonia is the second Autonomous Community, behind Galicia, where drug expenditure decreased the most in November. The austerity measures approved by the Catalan and the Spanish Governments to reduce drug expenditure are behind the significant drops in spending in Catalonia and the rest of Spain over the last few months. Pharmaceutical expenditure dropped by 13.11% over the first 11 months of 2012. Besides, the number of drug prescriptions issued in November in Catalonia decreased by 21.27% compared to a year ago.

Staff members from Catalonia’s main hospitals, including Sant Pau, Vall d’Hebron, Clínic, Parc Taulí and Germans Trias i Pujol, carried out several protests on Wednesday. Some of these protests had already started a few days ago and might last a few days longer, such as spending the night in the hospital lobby. They are demonstrating to criticise the budget cuts affecting health centres and to defend the public healthcare system. Some of these hospitals are recognised at an international level for their top quality clinical and scientific research work.

The leader of the Left-Wing Catalan Independence Party (ERC), Oriol Junqueras, has confirmed to the incumbent President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU), Artur Mas, that they do not want to sit in the Catalan Executive. However, Junqueras guaranteed Mas ERC’s support for approving the main issues, such as Mas’ re-election as President, next year’s budget and the self-determination referendum. In fact, this last point is the ERC’s main condition for the agreement. The CiU had been insisting on the need to make a stable pact with either the ERC or the PSC, after last Sunday’s electoral results, which would include sharing the government responsibilities in such difficult economic times.

The parties defending the organisation of an independence referendum within the next four years increase their support and obtain 64.4% of the seats in the new Catalan Parliament. In addition, the parties clearly defending independence get 54.4% of the MPs. The Centre-Right Catalan Nationalist Coalition (CiU), which has been running the Catalan Government and aimed for “an exceptional majority”, loses 12 MPs thus obtaining only 50 seats in the 135-seat Parliament. The Left-Wing Independence Party (ERC) becomes the second-largest force, increasing the number of its MPs from 10 to 21. The Catalan Socialist Party (PSC) drops from 28 to 20 seats. The People’s Party, which currently runs the Spanish Government, increases their support by 1 MP, obtaining 19 seats. Support for the Catalan Green Socialist and Communist Coalition (ICV-EUiA) grows from 10 to 13 MPs. The anti-Catalan nationalism and left-wing party Ciutadans (C’s) triple their results and obtain 9 MPs. The radical left-wing and independence coalition CUP enters the Parliament with 3 MPs.

Nobody doubts that the Centre-Right Catalan Nationalist Coalition (CiU) will win the elections again, but it is not clear if it will obtain an absolute majority or even lose some MPs. However, these elections are not so much about parties but they have de facto turned into a plebiscite on the Catalan peoples’ right to self-determination and the organisation of an independence referendum. If the parties defending the organisation of a self-determination referendum and independence clearly win the elections as expected, Spain would face its deepest political crisis of the last three decades. Knowing this, the campaign has been the tensest ever, including dirty tricks being played by Spanish nationalists against the CiU. However, many citizens will also vote while thinking about the last two years of budget cuts. Thus, left-wing parties supporting independence are likely to get more support.

For the last 30 years, the Catalan Socialist Party (PSC) and the Centre-Right Catalan Nationalist Coalition (CiU) have been Catalonia’s two main political forces, running the main public institutions and getting electoral results far higher than the rest of the parties. However, in 2006, the PSC started to decline and in the last Catalan elections it obtained its worst results ever, with 28 MPs and 18.38% of the votes. However, the party seems to be continuing its nose-dive and polls predict it could get between 22 and 15 MPs on the 25th of November, which could mean falling from being the second to third or even fourth-largest party in the Catalan Parliament. After a leadership change last December, the party led by Pere Navarro continued to marginalise its more pro-Catalan-identity members in top positions. The PSC defends a federal and pluri-national Spain, while recognising Catalonia’s nationhood.