finance

The Catalan Vice President and Minister for Economy and Tax Office, Oriol Junqueras, voted against the new regional deficit target of 0.6% of GDP agreed between the Conservative People’s Party (PP) and the Spanish Socialists (PSOE). During the Council on Fiscal and Financial Policies (CPFF, going by its Catalan initials) on Thursday evening, Junqueras said that the target is “absolutely far from what citizens need and deserve”. The Catalan Government had asked for a 1.18% deficit target for 2017, but the Autonomous Communities’ limits were set instead at 0.6% for next year, 0.3% for 2018 and 0% of GDP for 2019. They were accepted despite the opposition of Catalonia, the Balearic Islands and Valencia. The communities led by the PSOE abstained. The Spanish Finance Minister, Cristóbal Montoro, celebrated the fact that only three territories voted against the measure, saying there was a “good atmosphere” at the meeting.

The Catalan vice president and Catalan Minister for Economy and Tax Office, Oriol Junqueras, stated that the Government “won’t make any cuts”and emphasised that Catalonia already allocates 70% of its budget to social policies and that 90% of the Government’s expenses are final. Junqueras’ statements come after the Spanish Finance Minister, Cristóbal Montoro, sent a letter to several Autonomous Communities in Spain urging them to “comply with the budget stability”. Montoro also nuanced that Catalonia’s deficit target in 2015, which was 2.7%, surpassed the maximum deficit established by the Spanish government by 0.7%. “If the Spanish Ministry wants to make cuts or shut down hospitals, it will have to come and do it itself”, warned Junqueras. He also emphasised that “the Spanish Finance Ministry has imposed so many cuts in the last years that any additional ones are simply inapplicable”.

The Spanish Finance Ministry transferred this morning 3 billion euros from the Spanish Liquidity Point (FLA) corresponding to Catalonia. However there is still 34 million pending to be transferred due to the Ministry’s “invoices checking” procedure. The payment of this 3 billion euros from the FLA comes after the controversial "specific and additional controls" that Spain's executive has imposed on Catalonia to guarantee "transparency" and ensure that “the FLA won’t fund pro-independence whims”, in the words of Spanish Finance Minister Cristóbal Montoro. The 3.034 billion euros assigned this year to Catalonia includes the 2.6 billion euros outstanding from 2014’s FLA, which the Catalan government repeatedly asked for in order to pay pending debts, such as those from pharmacies and medical centres.

Catalonia will be the only Autonomous Community in Spain whose part of the Spanish Liquidity Point (FLA) will be subject to extra control measures. "It is arbitrary discrimination" against Catalan citizens and the Government's suppliers, stated current Catalan Finance Minister Andreu Mas-Colell this Tuesday and announced that the Government will take the measures before the Spanish Supreme Court. Spanish Finance Minister Cristóbal Montoro justified the imposition of "specific and additional controls" to guarantee "transparency" and ensure that “the FLA won’t fund pro-independence whims”. Mas-Colell accused Spain's executive of trying to take political advantage of an "ordinary procedure between administrations" and urged the Spanish government to pay the pending 3,034 million euros from the FLA before the end of the year. 

Current Catalan President, Artur Mas, appeared this Tuesday before the media to comment on the recent control measures that Spain's executive have set in place to control Catalonia's finances. "We are facing an institutional attack" stated Mas "Spain's executive is punishing Catalonia for defending political ideas which are pacific, democratic and respectful of human rights". "This is really grave" he commented and added that "the EU should be worried" about the fact that "democratically elected parliaments and pacific social movements are being attacked". Mas considers the specific measures that Spain's government announced on Friday to control Catalonia's administration of their share of Spanish Liquidity Point (FLA) funds is a way of "taking over" Catalonia's autonomy and self-government "after years of cutting them back".

Spanish Finance Minister Cristóbal Montoro warned that Catalonia will have access to the 3,034 million euros from the Spanish Liquidity Point (FLA) after the control extra measures imposed by the Spanish executive "are accomplished". Last Friday, the Spanish government announced specific control measures for Catalonia "to guarantee" that the FLA's money "won’t fund pro-independence whims". According to Montoro, the Catalan government "shouldn't distract the attention" and should correctly administer the citizens’ money. In order to increase the control over Catalonia's finances, Montoro announced that the Bank of Spain, the Comptroller General's Office and the National Institute of Statistics will investigate the 1,300 million euros that Spain's executive believes wasn't properly accounted for last year.

The Spanish government will impose special conditions on Catalonia when transferring funds from the Spanish Liquidity Point (FLA). The aim is to guarantee the “transparency” and “the legal compliance of the payments” as well as “make sure that the funds are destined for the planned activities”, stated Spanish vice-president Soraya Sáenz de Santamaría this Friday. She justified these “specific and additional controls” due to “Catalonia’s singularity” and “the non-fulfilment of its obligations”. Catalonia is set to receive 3,034 million euros from the FLA, which will be subject to these new measures. Current Catalan Finance Minister, Andreu Mas-Colell, responded that the transferring of FLA funds “shouldn’t be conditioned” to whether the Spanish government “likes the Catalan politics or not”. He added that the “dramatisation” of the announcement is part of the 20-D electoral campaign.

The Spanish Bank Association (AEB in Spanish) and the Spanish Confederation of Saving Banks (CECA in Spanish) warned about the “risks” of Catalonia’s independence. In an official announcement made this Friday, both associations assured that all banks with a presence in Catalonia “would face severe problems of judicial insecurity” in the event of a Unilateral Declaration of Independence after the 27-S elections. They outlined that “any political decision which would imply breaking the rules in force” would result in “exclusion from the EU and the Eurozone” for Catalonia. The Catalan Finance Minister, Andreu Mas-Colell, described the Spanish government as “being irresponsible” for pushing the banking sector to be against the independence of Catalonia. He regretted that such “a delicate sector” was used as an “artillery weapon”. 

The Catalan GDP increased by 0.9% between April and June this year, which is a positive figure but slightly lower than the 1.1% rate registered during the first quarter. However, in annual terms, the Catalan economy grew by 3% in the year to June, which is more than the 2.6% annual growth registered in March. Such a high level of annual growth had not been registered since September 2007, before the financial crisis started. According to the Catalan Finance Ministry, the minor fall off in growth registered between April and June compared to the growth rate from January to March is due to the "extraordinary" 1.1% growth rate of the first quarter. The Ministry stressed that 0.9% growth is still a very positive rate and does not break the trend of the economic recovery, on the contrary proving its strength.

The Spanish Government has presented its budget for 2016 and once again its investment in Catalonia is very far from being in line with the Autonomous Community’s GDP or population share within Spain. According to the planned budget for next year presented this Tuesday (many months in advance for electoral reasons), the Spanish Government plans to allocate only 10.7% of its territorial investment to Catalonia, even though the Catalan economy represents 19% of Spain’s overall GDP and Catalans make up 16% of Spain’s population. The amount planned for 2016 is however a bit higher than that allocated for 2015, which was only 9.5% of Spain’s total, the lowest in many years and widely interpreted to have been in retaliation for independence claims. The amount for 2015 was €1,072.3 million and that for 2016 is €1,179.5 million, which means a 10% increase (+€107 million) but is still one of the lowest investments in decades, both in percentage and absolute terms. Nevertheless, the Madrid-based media has focused on this increase, presenting Catalonia as a clear winner and forgetting about the extremely low investment levels from 2015 and 2016.

Despite the fact that all the Autonomous Community governments that are not run by the People's Party (PP) requested the Spanish Executive  – run by the PP – to allow them a greater deficit in 2016 and that Spain's independent fiscal authority Airef also recommended granting regional governments greater deficit targets for next year, the Spanish Finance Minister, Cristóbal Montoro, has rejected doing so. In 2016, the Autonomous Communities will have to close their budgets with less than a 0.3% deficit, "an absurd" and "unrealistic" figure according to the Catalan Finance Minister, Andreu Mas-Colell, who was recently awarded an honorary PhD in Economics by the University of Chicago. The Catalan Government asked for a 0.88% deficit target for 2016. Besides this, next year the Catalan Executive will receive €1.2 billion that should have already been transferred by the Spanish Executive but was not, due to Montoro's tax revenue miscalculations. In addition to this, since economic activity is growing, the Spanish Government will increase the Catalan Executive's funds by €700 million each year from 2016 onwards.

Josep Oliu admitted in an interview that the bank “does not have a plan B” in case of a break-up of Catalonia from Spain. The chairman of the Catalan financial institution admitted that they do not contemplate the independence of Catalonia as a feasible scenario. “Reaching agreements, changing some things, giving in a bit, trying to find a settlement suitable for everyone, that’s what we are all hoping for”, Oliu said. Commenting on the state of the economy, the banker regretted that politicians in government in Spain and Catalonia seem to be “ashamed” of the economic policies that they are introducing, when they should “explain to people that they are reasonable”.

The Catalan Government has been issuing retail bonds over the last two years as a regular way of financing its liquidity. All the previous issues have been a success, with high demand. Between April 2nd and April 24th Catalan citizens will be able to buy one year and two year treasury bonds of the Catalan Government’s debt, with an interest rate of 4.5% and 5% respectively.

The Spanish stock exchange celebrated the European Summit’s results by increasing 4.96% in a one day of trading. The main managers of the Spanish banks are convinced they will get the requested core capital with their own resources. In addition, they believe they will need 13.5 billion euros, and not 26.1 once the detailed calculations are made. Spanish financial circles consider the new rules, adopted to counteract French and German banks’ exposition to Greek sovereign debt, do not particularly benefit Spanish banks, which almost do not hold any Greek debt. In addition, as was the case with the stress tests, the criteria to analyse the bank situation ignores Spain’s proposals and imposes those benefiting German banks.

The 3.7 billion euros may be increased to 4 billion euros depending on demand. After the first day, the offer of bonds raised “high interest” according to financial sources. Citizens will be allowed to buy a minimum quantity of 1,000 euros and a maximum of 2 million euros. The Government is issuing bonds that expire in one year at an interest rate of 4.75%, and others expiring in two years at an interest rate of 5.25%. The Catalan Finance Minister stated that this bond offer is “safe and attractive”. It is the third emission of retail bonds in the Catalan Government’s history. The current bond emission mainly aims to replace those from the first emission, which expire next November 21st.