budget

On the occasion of the kick-off of the 2013 Barcelona International Motor Show, the Spanish Prime Minister, Mariano Rajoy, and 3 ministers (Finance, Economy and Industry) visited Barcelona on Friday. They held several meetings with the President of the Catalan Government, Artur Mas, and the Catalan Finance Minister, Andreu Mas-Colell. Mas and Rajoy talked for 20 minutes about Catalonia’s deficit target for 2013 and the budget for this year. Officially, they have not discussed the self-determination process. In addition, Mas also met with Luís De Guindos, Spain’s Minister for the Economy. Mas-Colell met with De Guindos and Cristóbal Montoro, the Spanish Finance Minister.

The deficit target for Spain’s entire public sector has also been raised from 4.5% to 6.3%. The Spanish Government has kept 81% of the deficit for itself while it is only responsible for 50% of Spain’s public spending. The Spanish Government has allowed itself a 5.1% deficit target, while the Autonomous Communities are only allowed a target of 1.2%. The regional governments fund the basic welfare state services and manage more than 35% of Spain’s total public spending. The Catalan Government welcomes the revision but considers it not to be enough. The Catalan Finance Minister, Andreu Mas-Colell, has been insisting that the Autonomous Communities should have at least a third of the total deficit. Therefore, with an overall target of 6.3%, the Catalan Executive should have a target at least 2.1%.

In a symbolical action, 11 town halls have handed in their monthly taxes to the Catalan Tax Agency and not to the equivalent Spanish entity. The Catalan Government’s body stated that it is legal, since later they will transfer the money to the Spanish Tax Agency. However, with this action, the town halls involved wanted to lend their support to “Catalonia collecting its own taxes”. In fact, the Catalan Government collecting all the taxes in Catalonia is widely asked for by a majority of the Catalan society. This week the Catalan Executive announced a programme supporting the development of its own Treasury, in order to provide the Catalan Tax Agency with muscle and experience. Furthermore the Association of Pro-Independence Town Halls asked its members to stop paying their taxes to the Spanish Tax Agency and switch to the Catalan one instead.

Barcelona’s Liceu Opera Theatre aims to attract philanthropic funds from the United States and establish cultural, social and economic links between the institution and American civil society to strengthen the image of the Liceu, one of Europe’s main opera houses. The Liceu Barcelona Opera House Foundation in New York plans to raise $100,000 in the first year. Other European opera houses and festivals such as the Paris National Opera, the Royal Opera House in London get between $200,000 and $700,000 each year. The project is launched by the Gran Teatre del Liceu and Levante Capital Partners with the participation of Baker & McKenzie.

Artur Mas, the President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU), is sceptical about the Spanish Executive’s desire to find a negotiated solution regarding Catalonia’s self-determination claims. Asked about the possibility of giving up the self-determination agenda in exchange for more economic resources for the Catalan Executive, Mas stated that “the Spanish Government will not exchange a better fiscal scheme for the self-determination vote”. However, he insisted that public finances are in “an emergency situation”. Therefore, he offered again for the Catalan Independence Party (ERC) and the Catalan Socialist Party (PSC) to sit in the Cabinet because “the situation requires adding strength” in order “to guarantee the survival of Catalonia’s self-government”.

According to Catalan and Spanish Government sources, the Spanish Prime Minister, Mariano Rajoy, and the President of the Catalan Executive, Artur Mas, secretly met this week in Madrid. They mainly talked about the deficit targets for 2013 and Catalonia’s self-determination process. It is the first time they have held a meeting in the last 6 months. On the first issue, they agreed on the need to relax the current 0.7% deficit objective, which would oblige the Catalan Government to carry out a budget adjustment of almost €4.5 billion. No specific figure has been decided on, but Mas said that it will be between 1.5% and 2%, depending on the European Union’s decision regarding Spain’s total deficit. Regarding the self-determination vote, they see things very differently and Rajoy continues to refuse to allow such a vote.

The Catalan Government’s grant will be reduced by 14% and revenue from advertising is expected to decrease by 10%. The budget reduction has been approved with loud protests from the workers, since it will mostly affect labour costs, which may plummet by 18%. Since 2010, the production and investment budget has dropped by 50%. The Catalan Public Television Broadcaster’s main station, TV3, has been clearly leading audience rankings in Catalonia for most of the years since its creation in 1983. The majority of the political parties and citizens in Catalonia support strong public television and radio stations. The idea of reducing the TV3 budget has been constantly presented by Spanish nationalists as the way to reduce Catalonia’s public deficit despite the €225 million public grant only representing 5% of the total budget adjustment to be accomplished in 2013.

The Catalan Finance Minister, Andreu Mas-Colell has announced that the Catalan Government had a public debt of €50,948 million on the 31st of December, 2012. Catalonia’s debt has increased by €16 billion in only 2 years due to the financial crisis. Furthermore, in 2013, the Catalan Government will have to pay €2.2 billion in interest on the debts – equivalent to 8% of its budget and 1% of Catalonia’s annual GDP. Catalonia has been a net contributor to the European Union for decades and has been paying around 8.5% of its annual GDP – equivalent to €17 billion – every year for services and infrastructure in the rest of Spain. Despite this fact, the Catalan Government does not receive enough money from the Spanish Executive, which raises most of the taxes and distributes revenue among Autonomous Communities.

Andreu Mas-Colell, the Catalan Government’s Finance Minister, emphasised that a 0.7% deficit objective means implementing an additional budget adjustment of €4.4 billion. This amount represents around 15% of the Catalan Executive’s budget for last year, which had already been reduced over the previous two years. Furthermore, expected revenue will decrease by 1% despite increases in tax, debt interest will grow by €300 million and the amount of spread payments will also increase by €150 million. In such circumstances a €4.4 billion one-year adjustment would blow up public services in Catalonia. Therefore, Mas-Colell urged the Spanish Government to find an agreement, as otherwise no one wants PM Rajoy to act “as the viceroy of Catalonia”.

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.