deficit

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.

The Catalan Parliament has voted Artur Mas, leader of the Centre-Right Catalan Nationalist Coalition (CiU), in as President of the Catalan Government with the votes of his own group and those of the Left-Wing Catalan Independence Party (ERC). Mas has been re-elected in the first vote with an absolute majority of 71 affirmative votes from the 135 MPs. The rest of the opposition voted against him for two different main reasons: either because they opposed the budget cuts despite supporting the organisation of a self-determination referendum or because they opposed Catalonia’s self-determination altogether. Mas based his campaign on two main pillars: fighting the economic recession and the public finance crisis and pursuing “Catalonia’s national transition”.

The leader of the Centre-Right Catalan Nationalist Coalition (CiU) and candidate for re-election to be President of the Catalan Government, Artur Mas, stated that he will keep the offer he made to the other parties supporting the celebration of a self-determination vote to join the government open until the end of the legislative term. The offer is due to “the hardness of the situation and the magnitude of the challenges to be faced”. The challenges are “the worst part of the economic recession”, “the crisis of public finances” and “the country’s greatest political operation of the last three centuries”. He also called for a summit to agree on the “impassable limits” of the Welfare state, as further budget cuts will be required.

The Centre-Right Catalan Nationalist Coalition (CiU) and the Left-Wing Catalan Independence Party (ERC) have reached a definitive agreement ensuring the next Catalan Government parliamentary stability to approve the main laws. The CiU leader Artur Mas will be re-elected President of the Catalan Government with the ERC’s vote in the Catalan Parliament by the end of the week. However, the ERC will not sit in the Cabinet and will only offer support on the agreed issues. The last point blocking the agreement was the CiU’s refusal to set a specific date for a self-determination referendum. Finally, they have agreed on calling for a citizen vote on Catalonia’s independence from Spain in 2014. However, the CiU has managed to include a clause postponing the voting call if both parties explicitly agree to do so.

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.

Catalonia won’t be able to meet its deficit targets without imposing cuts with “serious consequences” on the welfare state, said the Catalan President on Monday. Artur Mas explained in Parliament that the Spanish Government is forcing him to implement austerity cuts that are “impossible to meet without seriously affecting some basic elements of the welfare state”. Mas added that his government has been making a “very important” effort to reduce spending but blamed Madrid for “suffocating” the autonomous communities and local administrations by imposing very difficult deficit targets on them.

During the first few hours of the implementation of the tourist tax, no problems were detected. The fee ranges from 50 cents to 2.5 euros per hotel per night depending on the accommodation category and zone, with a maximum of seven nights per person. Children under 17 and tourists from social programmes are exempt from paying the fee. Clients have not complained and most of them say that they understand the need. Hotel owners have adapted their software to include the tax payment, although they complain that they have to pay for this change. This type of fee is common in countries such as the United States, France, Italy, Germany, Austria, Belgium, the Netherlands, Morocco, Egypt and Japan. The Catalan Government expects the tax to raise €50 million, to be used for the promotion of tourism.

Pimec, the main SME association in Catalonia, issued a survey taken of its members. Two thirds of the interviewees would support Catalonia’s independence from Spain while remaining in the European Union. 21.1% would prefer a more federal Spain and only 12.1% would back the current situation. In addition, 97.5% of the interviewees support improving Catalonia’s fiscal scheme. Furthermore, 61.2% think a hypothetical boycott of Catalan products by Spain would not or would hardly affect them.

The Catalan Government increased the amount initially requested from the Spanish Government Liquidity Fund for the Autonomous Communities (FLA) adding €410 more million in order to include payments to service providers and local councils. The Spanish Government and the Catalan Executive have included more types of payments eligible for receiving funds from the FLA. At the end of August the Catalan Government requested €5.02 billion to pay for debt maturities and some ordinary payments. At the same time, the Spanish Government does not respect investment agreements in Catalonia and ensures that Catalan citizens suffer from a permanent fiscal deficit calculated to be some 8.5% of the GDP (around €17 billion).

An official study issued by the Catalan Finance Ministry shows that Catalan citizens have given €24.77 billion more to the Spanish pension and unemployment funds than they have received back from it. The study takes into account the contributions of Catalan citizens and companies between 1995 and 2010. Without the Catalan contributions, the Spanish Social Security system would have had a €86.33 billion deficit in the same period. The Catalan contribution to the Social Security system was negative in 1995-1996 and 2009-2010, while between 1997 and 2008 it showed a budget surplus. Without Catalonia, Spain’s Social Security would have only had a budget surplus between 2003 and 2007.

The Catalan Government’s Spokesperson, Francesc Homs, ruled out the Spanish Executive deciding to delay the payment as an answer to Catalonia’s self-determination process, as it would be “malfeasance”. However, he was angry about the €24 million fine the Spanish Government has issued against the Catalan Executive for delaying Social Security payments. Homs considered this delay to be a consequence of not receiving the €568 million on time and announced an appeal to the Constitutional Court. The Catalan Government had requested €568 million weeks ago from the Spanish Government’s Liquidity Fund for the Autonomous Communities (FLA) to face some of September’s payments. However the amount did not arrive on time and payments to private healthcare, education and social centres receiving public funds were delayed.

The Spanish Government states that the money will “start to arrive” next Tuesday. Over the past few weeks, the Catalan Finance Minister has warned about the urgency of receiving the requested €560 million from the Liquidity Fund for the Autonomous Communities (FLA) in order to face all September’s payments. However, the Spanish Government has sent €400 million to pay debt maturities but has not sent the remaining €560 million to pay private health, education and social centres that receive regular funds from the Catalan Executive. All direct salaries have been paid, but not other payments. In August, the Catalan Government requested €5.02 billion from the FLA for the entire year 2012 in order to face debt maturities and ordinary payments, since access to international markets is closed to the Autonomous Communities.