financial

Spain sees 3.18% increase but totals still down on last year

Public business agency chosen for fDi Strategy Award from among 112 candidates from all over the world

Judges reverse earlier decision favoring clients following negative impact on markets and prospects of big reimbursements costs

Latest developments over the October 1 independence referendum draw further attention from top international media

Unemployment in Catalonia increased by 4,573 people in November and reached 462,969 individuals registered on the lists of the Catalan Public Employment Service (SOC). According to the data released by the Spanish Employment Ministry and Social Security, unemployment saw a 1% rise in monthly terms. This increase in jobseekers is the highest registered in November since 2013. The Catalan Secretary General of Employment, Social Affairs and Families, Josep Ginesta, warned that the reduction of unemployment in Catalonia is “slowing down” due to the dependence on seasonal economic sectors. In this vein, he proposed the reconversion and reindustrialisation of Catalonia to create “more and better” jobs.  In annual terms, registered unemployment has decreased, with 58,681 less jobseekers, an 11.25% drop. 

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 President, Carles Puigdemont, is suspicious regarding Spain’s executive willingness to dialogue. During this Wednesday’s session of control in the Parliament, Puigdemont stated that Catalonia deserves a bilateral negotiation with the Government in Madrid and that he considers anything other than this a way to “dilute and disguise what is really going on” in Catalonia and therefore “confuse public opinion”. Pro-independence radical left CUP MP, Mireia Boya, went a bit further and urged Puigdemont not to go along with Spain’s “siren calls” in relation to its supposed openness to dialogue. On the other hand, Xavier García Albiol, the leader of the Catalan branch of Spain’s governing party PP, called for Puigdemont not to be like “a statue” before the “signals” sent by the Spanish Government. 

The Financial Times report FDi European Cities and Regions of the future 2016/2017, recognised Catalonia as the best Southern European region to invest in for 2016 and 2017. To make the most of this prognosis, the Catalan Minister for Business and Knowledge, Jordi Baiget, visited London this Monday, in the framework of the 'Brexit' plan, which aims to promote foreign investment in Catalonia and strengthen trade relations with the United Kingdom. At a meeting with thirty businessmen and international investors at the headquarters of the newspaper the Financial Times, Baiget explained that that there is "no anxiety" among investors regarding the political process going on in Catalonia, but rather only "interest". Furthermore, the Catalan Minister stressed that investors really value “Catalonia’s assets”, such as its “good communications and trained and qualified people”. 

Spain’s effort to reduce its public deficit “has been insufficient”, according to Brussels. Thus, the European Commission (EC) took this Thursday the first step in order to fine Spain, ahead of the Ecofin meeting. The fining process foresees that 20 days after this meeting, the EC could present the suggested fine, which could equal 0.2% of Spain’s GDP. According to a report released this Thursday by the EC, Spain closed 2015 with a 5.1% deficit target, far from the 4.2% established by Brussels. The report concludes that Spain’s fiscal effort fell “significantly short” of what was recommended and even “relaxed in 2015”. “Spain did not reach the intermediate target for the headline deficit in 2015 and is not forecast to put an end to its excessive deficit by 2016”. 

The region which attracted the fourth-most foreign investment in Europe in 2015 was Catalonia. According to the Financial Times’ FDi Markets report, the Catalan economy attracted €5.224 billion throughout 2015, the highest figure of the data series, which sets Catalonia as the leading region in the Western European area. The sector which attracted most foreign investment was ICT, which according to Catalan Ministry for Business and Knowledge, Jordi Baiget, proves the “traction effect” of the Mobile World Congress for the Catalan economy. Baiget explained this good result as being due to Catalonia’s geographic situation and the neighbouring markets, as well as to its qualified workforce and its solid, diversified and innovative business network. In March, the Financial Times report FDi European Cities and Regions of the future 2016/2017 recognised Barcelona as the best city in Europe for foreign investment.

2015 was the second best year, in terms of foreign investment, since the historical series began in 1993. Catalonia attracted €4.8 billion this past year, 57.8% more than the foreign investment registered in 2014, and only exceeded by the record €4.9 billion registered in 2010. Thus, Catalonia attracted 22% of the foreign investment received in the whole of Spain, second only to Madrid, which attracted 46.5% of the international investment. However, foreign investment in Madrid decreased by 1.2% this past 2015 in comparison to 2014. These data indicates that Catalonia’s push for independence is not dissuading foreign investors, on the contrary; during the first trimester of 2015, Catalonia was the leading region in Continental Western Europe in terms of investment. 

Pro-independence parties have “achieved” their goal in “winning 72 of the 135” seats in the Catalan Parliament, stated an editorial in the Financial Times published this Tuesday. The British business daily insisted that once Spain has held national elections at the end of this year, a new government in Madrid needs to enter into talks with President Mas, to “find a third way between independence and the status quo”. However, the editorial is titled “Catalonia needs to step back from the brink”, since it puts forward the idea that Mas has “less legitimacy to implement his plan” considering that the percentage of voters who supported a clear ‘yes’ for independence was less than 50%.

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”. 

In times of economic crisis, the Mariano Rajoy-led Spanish Government has been making recentralisation a main driver of its political agenda, using the economic recovery as the reason for passing the reforms. An additional step in this direction was taken on Monday with a new regulation forcing Spanish Autonomous Communities to seek permission from the Spanish Ministry of Finance before granting loans and guarantees to private companies located in their territories. From now on, Madrid's permission will be conditional upon the applicant's compliance with deficit targets. The new regulation substantially curbs the Autonomies' powers to shape their industrial policies, following a reform passed in May that modifies both the Organic Law for Financing the Autonomous Communities and the Organic Law on Budgetary Stability and Financial Sustainability.

The Catalan capital is Europe's 8^th most attractive city to invest in and the highest-ranked city located in the southern part of the continent, according to the international consultancy firm Ernst & Young. London, Paris, Berlin, Frankfurt, Amsterdam, Brussels and Munich come first in the European ranking and are followed by the Catalan capital, ahead of Madrid, which comes in 10^th position. EY highlights the fact that Barcelona has attracted "enough" international business projects to confirm its place among Europe's top 10 most attractive cities for foreign investment. Catalonia ended 2014 with 108 direct foreign investment projects, a 27% increase on 2013 figures. These projects created 7,089 new jobs. EY stressed that none of the 7 cities ahead of Barcelona were able to transform direct investment into the creation of so many new jobs. London was the closest contender, creating 3,470 jobs, half of that of the Catalan capital.