budget

The Catalan Government has presented its budget proposal for 2014, which posts a 1% deficit, representing a 35.5% annual reduction and amounting to €1.98 billion, in line with the 2014 deficit targets imposed by the Spanish Government. The budget prioritises healthcare, education and social policies, which represent 71% of the total non-financial spending. Non-financial spending grows by 0.2% and reaches €20.30 billion, while the total spending amounts to €29.31 billion. The Catalan Finance Minister stressed that spending had not been reduced this year since in the last 3 years it had already dropped by 22%. Budget cuts “have reached their limit”, as otherwise “social cohesion” and “the Welfare State” would “be at risk” he said. In 2014 the Catalan Executive will spend the same per inhabitant as it was doing in 2004 taking into account inflation (€1,901).The adjustment for 2014 focuses on increasing revenue by €3.2 billion, mostly through new taxes (€910 million) and the sales of assets and privatisations (€2.32 billion). On top of this, the Catalan Government forecasts a 0.9% economic growth for 2014, leaving behind the recession of 2012 (-1.2%) and 2013 (-1.1%).

The Catalan Government has forecasted a 0.9% economic growth for 2014 in its budget proposal for next year, leaving behind the recession of 2012 (-1.2%) and 2013 (-1.1%). The positive figures are mostly due to the strength of the export sector – which will continue to improve its results. The main factor slowing down growth will be the internal demand, which will continue to decrease although it will do so at a lower pace. In addition, the Catalan Executive believes the unemployment rate will decrease and reach 23.1% by the end of the year. It is expected 2013 will end with a 23.7% unemployment rate, higher than the 22.6% rate registered at the end of 2012.

In the last few days, there has been an attempt to build bridges between Catalonia and Spain, despite the visible increase of tension between the two governments. In public the Catalan and Spanish Executives are heading for a collision but at the same time discreet manoeuvres explore alternative ways out. This Tuesday, the ‘number 2’ of the Centre-Right Catalan Nationalist Coalition (CiU) – which runs the Catalan Government – Josep Antoni Duran I Lleida acknowledged that he met with the Spanish Prime Minister and leader of the People’s Party (PP) Mariano Rajoy on the 16^th October. Besides, the Catalan President, Artur Mas, met on Friday with the Secretary General of the Spanish Socialist Party (PSOE) to talk about a constitutional change. Today, the Spokesperson of the Catalan Government, Francesc Homs, stated that Catalonia is waiting for an offer from the Spanish establishment. Although “there is no deadline” for this offer, the self-determination process will not be waiting for it, although if it arrives it will be studied.

During the first two thirds of 2013, the Catalan Government deficit amounted to €2.05 billion, equivalent to 1.06% of Catalonia’s GDP. The figure corresponds to 67% of the 1.58% deficit target imposed by the Spanish Government to the Catalan Executive for the whole year 2013. Meanwhile, the entire Spanish public sector posted a deficit corresponding to 5.07% of Spain’s GDP in the same period, although data from municipalities is still pending to be included. The figure already represents 78% of the total 6.5% deficit target that the European Union allowed Spain for the entire year 2013.

The President of the Catalan Government, Artur Mas is the most senior public figure in Catalonia, just after the King of Spain and the Spanish Prime Minister. However, at Thursday’s scheduled dinner with the main Catalan business association ‘Foment’ and the Spanish Deputy Prime Minister, Soraya Sáenz de Santamaría, a last-minute change in the protocol put Mas in second place. The Catalan President considered that “conditions had changed” and as a protest he announced he was not going to the dinner. Instead, the Catalan Minister for Business and Employment was representing him. ‘Foment’ has been ambivalent regarding Catalonia’s self-determination process, although it supports the claim for finding a negotiated way out of the current political situation by organising a legal referendum.

The Spanish Government has sent a Budget Plan to the European Commission, following the new rules giving Brussels greater control on Member State finances. The plan’s scope includes all government levels in Spain. In the plan, the Spanish Government imposes a global budget adjustment of €8 billion on the Autonomous Community governments, including Catalonia’s, to be achieved within the next two years. €2.14 billion would come from increasing revenue next year, since Madrid considers that the Autonomous Communities can still increase their own taxes, particularly those linked to the environment. €1.93 billion would come from further budget cuts. This would total €4.07 billion in 2014, which would roughly be repeated in 2015.

The Catalan Government has published a report listing all the Spanish Executive’s disloyalties towards Catalonia including not respecting legislation, devolved powers and cultural aspects. The 50-page document has a chapter quantifying the costs of such disloyalty, which totals €9.375 billion, according to the Catalan Government. €5.748 billion correspond to infrastructure which has not been built; €672 million to a reduction in institutional transfers; €1.715 billion to spending increases due to the Spanish Government’s unilateral decisions; and €1.239 to revenue reductions due to similar unilateral decisions which have never been compensated. The report does not take into account the so-called fiscal deficit – the €16.5 billion that each year Catalan tax-payers transfer to the rest of Spain. The Catalan Government emphasised that there has been “a permanent disloyal activity” since 2000.

The Catalan Government will receive €1.7 billion less from the Spanish Liquidity Fund (FLA) in 2013 than had been previously foreseen. The news was announced by the Spanish Government in mid-October, with only 10 weeks left before the end of the year. Madrid has justified the decision by linking the FLA to the plan to lend money to public bodies in order to enable them to pay suppliers. The money to pay suppliers will now be deducted from the FLA, changing the previous conditions. As a consequence, the Catalan Government will not be able to fund the 1.58% deficit it had allowed, since the FLA is its only access to liquidity. Now, Catalonia will only have money for the previously-foreseen 0.7% deficit. The Catalan Executive feels “tricked” as “it is not understandable that the Spanish Government agrees to a greater deficit and later cannot fund this deficit”.

On Monday the Spanish Government presented its budget proposal for 2014. As every single year, it will only invest in Catalonia a much inferior budget share than Catalonia’s weight within Spain in GDP or population terms. In 2014, the Spanish Government is planning to spend just 9.6% of its total regional investment in Catalonia, far short of the Catalan GDP (18.9% of Spain’s total) and population (15.7%). In addition, compared to the budget forecast for 2013, the €944.42 million planned for 2014 represents a 25% annual drop, while investment throughout Spain will only be reduced by 7.2%.

The President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU), Artur Mas, and the Left-Wing Catalan Independence Party (ERC) agreed on speeding up the process of building “state structures” and drafting the “most social budget” in Catalonia’s recent history. In addition, Mas criticised the ‘third way’ between independence from Spain and the current situation proposed by the Catalan Socialist Party (PSC) and CiU’s ‘number 2’, saying that Catalans “have been trying” this way “for the last 100 years” and “it has never worked”. Spanish nationalist People’s Party (PP) and Ciutadans (C’s) called on Mas to stop the self-determination process. However, the main Catalan parties, from left to right and representing 77% of the parliamentary seats, presented a common text supporting Catalonia’s right to self-determination through a legal vote.

On the occasion of the Catalan Parliament’s main annual debate, called the Debate on General Policy, the President of the Catalan Government, Artur Mas, asked the political parties to work on a broad “triple agreement” on the exact date, question and legal framework for holding a self-determination vote. Furthermore, Mas stated that he wanted this agreement to be reached before the end of the year, in order to have the road paved for holding the vote in 2014. However, he did not say whether the question will be exclusively about Catalonia’s independence from Spain or whether a third way will also be included as an option. Besides, Mas re-affirmed his will to negotiate with the Spanish Government on the legal formula for organising a referendum. However, he also stressed that if Madrid completely rejects talks on holding a self-determination vote, there is nothing to negotiate on.

The Spokesperson for FC Barcelona’s Board of Directors, Toni Freixa, emphasised that there will be a predicted surplus of 36 million euros after taxes for this season. Freixa explained that the additional income had come from sponsorship deals, as well as the transfer of Thiago Alcántara to Bayern Munich. That’s the first time in FC Barcelona history that the budget has been over 500 million, while operating income for last season was 491 million euros, €21 million more than originally budgeted.

This coming 11^th of September – which is Catalonia’s National Day – pro-independence supporters have organised a gigantic human chain called the ‘Catalan Way Towards Independence’ that will cross Catalonia from North to South stretching 400 km and passing through some of the main cities, such as Barcelona, Girona and Tarragona. After having organised the 1.5 million-strong demonstration of 2012, the civil society platform Catalan National Assembly is preparing a new massive demonstration that calls for independence from Spain. This year’s peculiar demonstration is inspired by the ‘Baltic Way’ of 1989, which gathered 2 million people forming a 670 km-long human chain crossing Estonia, Latvia and Lithuania. The ‘Baltic Way’ was organised exactly 24 years ago and issued a manifesto that read “a common European home can only by set up if all European nations are granted a free right to self-determination”.

In the last three years, 1,060 companies have moved their headquarters from Catalonia to the region of Madrid, according to a report published by Madrid’s regional Government. The report states that most of them took the decision because of the lower taxes that exist in Spain’s capital, compared to other areas such as Catalonia. Since 2010, 5,000 companies based in the rest of Spain decided to move to Madrid; 21.4% of them were from Catalonia. Paradoxically, 43 cents out of every euro paid in taxes in Catalonia is to pay for investments and services made in other parts of Spain, which turns into an annual fiscal deficit of 8.5% of Catalonia’s GDP, meaning that Catalans are obliged by the Spanish Government to give away €16.5 billion. Meanwhile, the Catalan Government is under-budgeted and obliged to implement severe budget cuts and raise taxes to balance the budget.

The President of the Catalan Government, Artur Mas, officially announced on Tuesday that last year’s budget will be extended for the whole of 2013, since the 1.58% deficit target imposed by the Spanish Executive is too low and arrives too late. However, he explained that the budget extension guidelines will meet the 1.58% deficit target, because otherwise they would not have the money to pay for the additional spending. Furthermore, Mas announced they will take the “unfair and illegal split” of the deficit targets among the different government levels to court, since they consider the Spanish Government has not done it “in a proportional way”, since it keeps most of the deficit allowed for Spain’s total public sector for itself. Some opposition parties have strongly criticised the Catalan Government for extending the budget.