deficit

Artur Mas, President of the Catalan Government, presented the Government Plan for 2013-2016 on Tuesday, emphasising that he aims to complete the four-year office term regardless of whether Catalonia’s self-determination vote is finally held in 2014, as the governing Centre-Right Catalan Nationalist Coalition (CiU) planned with the Left-Wing Catalan Independence Party (ERC). With the Plan, Mas has set 77 objectives in seven different areas, aiming to reaffirm political leadership and show the Catalan Government’s actions in a wide range of areas such as economic recovery, job creation, public services, environment protection, etc. Mas also asked the ERC and the Catalan Socialists (PSC) to sit in the Catalan Government. All the opposition parties except the ERC criticised the Plan.

The Spanish Constitutional Court has lifted the temporary suspension of the Catalan Government’s tax on total bank deposits while it is waiting to issue a sentence on the measure. The Spanish Government took Catalonia’s tax on bank deposits, the drug prescription fee and the new judicial taxes to the Court. The Constitutional Court accepted Madrid’s appeal in January and temporarily suspended the implementation of the three measures for five months. After the period is over, the Court believes that, taking into account the need to reduce public deficit, the Catalan Government can now implement the tax on banks, while the magistrates agree on a definitive sentence. However, the Court has extended the suspension on the judicial and drug prescription fees.

On Tuesday, the Catalan Government posted the so-called fiscal balances for 2010, showing the difference between the money paid by Catalans in taxes and fees to the Spanish Government and what comes back in form of funds, services and infrastructure. Using the monetary flow formula, Catalonia had a fiscal deficit of €16.54 billion, representing 8.5% of its GDP. Using the benefit formula, the fiscal deficit represents 5.8% of the Catalan GDP (€11.26 billion). The Catalan Finance Minister, Andreu Mas-Colell, stated that both formulas “are complementary” but he found the monetary flow one to be closer to the reality. The figures are similar to the results from previous years as well as to the study published in 2008 by the Spanish Finance Ministry with data from 2005. In the last 25 years, Catalonia has given away 8.1% of its GDP each year.

Between January and March, the Catalan Government had a budget deficit of €411 million, representing 0.21% of Catalonia’s GDP. The definitive deficit target for 2013 for each Autonomous Community has not been set by the Spanish Government yet. Madrid set a 1.2% target a few weeks ago but everybody assumes it will be raised as negotiations are on-going with the Catalan Government. Rumours indicate that Catalonia’s deficit target may finally be set at around 1.8%. The Autonomous Communities posted a total public deficit of €1.24 billion at the end of the first quarter, corresponding to 0.12% of Spain’s GDP. According to the Spanish Deputy Minister for Budget, the figure represents half the deficit posted in the same period last year.

As it was announced on Monday, the Catalan Government has adapted its budget extension guidelines to a higher deficit target, while it is waiting to find out the definitive deficit target decided by the Spanish Government. Since the elections were held in November, it was the new Catalan Government’s responsibility to draft the budget for 2013. However, the budget has not been presented since the Catalan Government disagrees with the deficit target imposed by the Spanish Government and it is negotiating for its reduction. Meanwhile, it is operating with an extension of the 2012 guidelines, a procedure run by a series of strict guidelines. The guidelines included the 0.7% deficit target initially allowed for this year, which have obliged the Catalan Government services to implement severe spending limitations in the first months of the year. Most of the opposition criticised not debating the new guidelines.

During the weekend, the Spanish Finance Minister, Cristóbal Montoro, stated that the Catalan Government’s deficit for 2013 will not be above 2%. The Catalan Government has been asking for a 2.1% deficit target, corresponding to a third of the 6.3% that was announced by the Spanish Government as the figure allowed for Spain’s entire public sector. On Friday, several high-level meetings to discuss the issue were held in Barcelona between members of both executives. On Monday, the Spanish Prime Minister, Mariano Rajoy, stated that in his meeting with the President of the Catalan Government, Artur Mas, they did not discuss specific figures. He also stated that no figure will be decided on until the European Union officially confirms Spain’s 6.3% total deficit target.

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.

The leader of the Spanish Socialist Party (PSOE), Alfredo Pérez Rubalcaba, and the President of the Catalan Government, Artur Mas, secretly met on Sunday in Madrid, along with the Secretary General of the Catalan Socialist Party (PSC), Pere Navarro. Mas urged the PSOE to include the People’s Party (PP) in the debate on the reform of the Spanish Constitution and he warned that including the right to a self-determination vote is a “basic and essential condition” for a large majority of Catalans. The PSC, despite opposing Catalonia’s independence from Spain, backs its right to vote for self-determination, but Rubalcaba is completely opposed to it and considers it to be “impossible” to ever reach an agreement on such a vote. However, Rubalcaba insisted on the need to find a better relationship between Catalonia and Spain, in order to “remain together for centuries to come”.

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”.

In early November, the Catalan Government decided to allocate the public tender privatising the service of the publicly-owned Aigües Ter-Llobregat – which supplies water to the 5 million people of Greater Barcelona – to a joint venture led by Acciona. This meant that the Catalan Executive cashed in €300 million in 2012 and €700 million was to be split over the next 50 years. The operation was aiming to reduce public deficit. However, Agbar appealed the tender because it thought that Acciona was not fully respecting the terms of reference. Now the Court have backed Agbar’s view and cancelled the tender. Acciona has already announced that it will appeal to the Spanish Supreme Court and, in the case that it loses the concession, it will sue the Catalan Government for damages, since the contract came in to effect on the 1st of January.

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 Spanish Finance Minister, Crístobal Montoro, confirmed that if Brussels relaxes Spain’s total deficit target for 2013, he will share this flexibility with the Autonomous Communities’ governments. A working group has been created to analyse the most convenient formula for this, including that of setting different deficit targets for each Autonomous Community. The Catalan Government celebrated the decision, since it has been asking for it for many months. In addition, the Catalan Finance Minister, Andreu Mas-Colell, stated that he will look for “a smooth relationship” with the Spanish Executive to negotiate the details. On Wednesday, Mas-Colell proposed the idea that deficit targets could be set according to debt levels. In the last few days, the Catalan Government has sent several messages in order to show a willingness to talk to Rajoy’s cabinet about the most important subjects on the table.

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.