budget

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.

The Catalan Government has created a Treasury Secretariat within its Finance Ministry, which will be in charge of managing revenue, with the objective of developing Catalonia’s own tax office. The creation of a treasury of its own would allow the Catalan Executive to collect all the taxes generated in Catalonia, as Navarra and the Basque Country have been doing for decades. It is one of the electoral promises of the governing Centre-Right Catalan Nationalist Coalition (CiU) and is also part of the parliamentary stability agreement reached with the Left-Wing Catalan Independence Party (ERC). A Catalan tax office collecting all the taxes is an historical claim of a large part of the Catalan society. However the Secretariat created is in line with the CiU’s strategy of creating state structures and it has been criticised by the pro-Spanish unity parties.

On the 5th of December, the Catalan Executive allocated the tender to privatise the public companies Tabasa and Túnels del Cadí to the joint venture formed by Invicat (owned by Abertis) and the investment bank BTG Pactual. On Friday, the deal was completed and the Catalan Government earned €309.6 million, representing 72% of the total of the €430 million operation. In addition, the two public companies will effectively disappear. The concession will last for the next 25 years and the Catalan Government will continue to own the infrastructures but it will transfer the management and exploitation. The operation includes the tolls at the Vallvidrera highway tunnels accessing Barcelona and the Cadí tunnel, at Cerdanya County, in the Pyrenees.

The Spanish Prime Minister, Mariano Rajoy, has accepted the offer sent by the new Catalan President to talk about Catalonia’s claims, while keeping them “always within the Constitution”. Furthermore, he has rejected the possibility of modifying the 0.7% deficit target imposed on the Autonomous Communities for 2013. The Catalan Finance Minister, Andreu Mas-Colell, explained that, if the payment of financial interest is excluded, meeting next year’s 0.7% deficit target represents a budget surplus, which “makes no sense from an economic point of view in a context of recession”. Mas-Colell proposed that the Autonomous Communities meet a 1.5% deficit target in 2013, as they represent more than a third of Spain’s total public expenditure and Spain has been authorised a total deficit target of 4.5%.

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.

With this decision, the Catalan Government wants “to safeguard” its power to adopt this type of tax or the equivalent revenue, after the Spanish Government announced the creation of its own tax while keeping it at 0% to prevent the Autonomous Communities from approving it. The Constitutional Court has already backed the taxes on bank deposits created by Extremadura, Andalucía and Canarias. Catalonia’s tax will not affect clients but only the banks. It will affect all banks operating in Catalonia, independent of where they are based. In addition, it will have retroactive effects as from the 30th of November. The Spanish Finance Minister warned that the Spanish Government will fully oppose it.

Holding the self-determination referendum before 2015 and certain aspects of the fiscal policy are the final obstacles to a definitive agreement between the Centre-Right Catalan Nationalist Coalition (CiU) – which won the elections but lost support – and the Left-Wing Catalan Independence Party (ERC) – which is the second largest party now, having doubled its support. After two and half weeks of negotiations, the ERC will vote for the CiU leader, Artur Mas, to be re-elected as President of the Catalan Government. However, the ERC’s stable parliamentary support – since it will not directly be part of the Cabinet – is not granted yet. Party leaders met on Friday to seal the agreement, but differences persist and the date for the re-election debate is approaching.

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.

At the end of October, the Catalan Government had a 1.17% deficit, representing a difference of €2.34 billion between revenue and spending. It is a significant reduction compared to last September, when the deficit reached 1.26% of the Catalan GDP. Furthermore, it also represents a 23% reduction compared to the first ten months of 2011, when there was a €3.05 billion deficit. The improvement is mostly due to an increase in revenue. By the end of 2012, the Catalan Government is obliged to meet a 1.5% deficit target.

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.