montoro

The Catalan Executive says it has the Spanish Government’s commitment to send the €1.76 billion that the Spanish Finance Minister, Cristóbal Montoro, announced in late October would not be transferred. This money corresponds to the loan to fund the Catalan Government’s deficit target increase from 0.7% to 1.58% in 2013 approved in July by the Spanish Executive. However, in late October – 10 weeks before the end of the year, Montoro said that this amount would be deducted from the fund to pay the Catalan Government’s service providers. This meant that Catalonia was missing €1.76 billion to fund public services and departments for the last part of the year. Negotiations during the last 4 weeks have modified Montoro’s October decision.

On Monday the Spanish Government presented its budget proposal for 2014. As every single year, it will only invest in Catalonia a much inferior budget share than Catalonia’s weight within Spain in GDP or population terms. In 2014, the Spanish Government is planning to spend just 9.6% of its total regional investment in Catalonia, far short of the Catalan GDP (18.9% of Spain’s total) and population (15.7%). In addition, compared to the budget forecast for 2013, the €944.42 million planned for 2014 represents a 25% annual drop, while investment throughout Spain will only be reduced by 7.2%.

11^th September is Catalonia’s National Day and two main ceremonies traditionally take place in the morning. The first one is the flower offering at the Rafael Casanova monument, honouring the leader of Barcelona’s defence against the Bourbon invasion of 1714. The second one is an institutional ceremony near the Catalan Parliament honouring Catalan culture, language and identity, including: poetry, music and flamenco dancing brought by Andalusian immigrants. The People’s Party (PP) – which runs the Spanish Government – has not been participating in the flower offering for the last few years, but this year it also decided not to attend the institutional ceremony. Instead, the PP held its own get-together with party banners.

The Catalan Finance Minister, Andreu Mas-Colell, accuses the Spanish Government of “asphyxiating” the Autonomous Communities. The 1.58% deficit target imposed to the Catalan Government represents €2.6 billion of further budget adjustment compared to last year’s budget, which ended with a 1.96% deficit. Mas-Colell denounced that the Spanish Executive is “keeping for itself the greatest share of the deficit pie”, while it is only responsible for 50% of Spain’s public spending. The Spanish Government is setting itself a deficit target of 5.2% for 2013 and most of the flexibility allowed by the European Union, which authorised a 6.5% deficit for Spain’s total public sector. Meanwhile, the Autonomous Communities have a deficit target 4 times stricter, although they manage 36% of Spain’s total public spending as well as basic services such as healthcare and education.

On Tuesday, the Spanish Finance Minister, Cristóbal Montoro, stated before the Senate that the Spanish Government “was financing the services” the Catalan Executive provides. In an angry and agitated tone, Montoro concluded the intervention shouting “Do you understand?! Don’t you understand?!” to the Catalan Senator who had asked him about the recentralisation of power. The President of the Catalan Government, Artur Mas, answered the Spanish Finance Minister in a calm but angry tone: “the Catalan Executive finances public services thanks to the effort Catalan citizens make each day by producing, working and paying taxes. And from all the taxes paid by Catalan citizens, a large amount, as much as €16 billion leaves Catalonia and never comes back [after the Spanish Government’s redistribution]. Who the heck is funding whom? It’s Catalonia that funds the Spanish State from many points of view”.

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%.

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.

A few hours earlier, the Swiss bank Lombard Odier stated that the Catalan presidents Artur Mas and Jordi Pujol do not have any relationship with the company. The Spanish nationalist newspaper ‘El Mundo’ published a report 9 days before the Catalan elections, with the official stamp of the Spanish Police on it, accusing the incumbent President of the Catalan Government, and candidate for re-election from the Centre-Right Catalan Nationalist Coalition (CiU), Artur Mas, of having secret accounts in Switzerland. The fake report also incriminated Mas’ family, the former Catalan President Jordi Pujol and two of Pujol’s sons. The report completely altered the election campaign. Now, four months after the report was issued, the Catalan Government has demanded a public rectification since some Spanish Ministers and leading members of the People’s Party validated the report at the time.

The Catalan Government and most of the political parties have criticised the Spanish Government’s project to reduce local powers. Furthermore, the Catalan Vice-President, Joana Ortega, emphasised the “unfair vision” of local governments given by the Spanish Finance Minister. Ortega underlined that in Catalonia, most of the town halls ended 2012 with a budget deficit of 0%, which is “not in line with the mismanagement image given” by the Spanish Government. Furthermore, while the Spanish Government is aiming to reduce the number of councillors earning a salary to only 18%, Ortega reminded them that in Catalonia only 10% are now earning a salary. Political parties in Catalonia criticised the Spanish Government for taking away power from the government level closest to the citizens.

On Monday the Spanish Minister for the Economy, Luís de Guindos, stated that Spain might internally redistribute its total deficit target among the different government levels in order to give more breathing space to the Autonomous Communities, which have been taking on a large part of the budget adjustment. However, the following day, the Spanish Finance Minister, Cristóbal Montoro, ruled out this possibility if Brussels does not give greater flexibility to Spain and increase its total deficit target for 2013. On Wednesday, after the contradictory messages, the Spanish Prime Minister, Mariano Rajoy, confirmed Montoro’s approach. In 2013, Spain has been given a total deficit target of 4.5%: 3.8% is for the Spanish Government (responsible for 50% of public spending) and 0.7% is for the Autonomous Communities (responsible for almost 40%).

Artur Mas, leader of the Centre-Right Catalan Nationalist Coalition (CiU), has sworn the oath as President of the Catalan Government again, two years after he did it for the first time. After swearing office, Mas delivered a long speech in which he asked Spain to not put the will of Catalans to freely decide on their own future “behind bars”. He also compared Spain and Catalonia’s relations with “two boats” following a “collision course”. Mas stated that he is ready “to change direction” because otherwise “Catalonia will be adrift, and when you are adrift, you are the most likely to crash against the rocks”. The Spanish Finance Minister, Cristóbal Montoro, was present at the ceremony as the highest representative of the Spanish Government.

Artur Mas, the leader of the Centre-Right Catalan Nationalist Coalition (CiU), and Oriol Junqueras, President of the Left-Wing Catalan Independence Party (ERC), have signed the parliamentary stability agreement, which includes the call for a self-determination vote by citizens and the modification of taxation in order to increase revenue. Mas will be re-elected President of the Catalan Government and the ERC will not sit in the Executive but will offer parliamentary support on the agreed issues. The CiU and the ERC are asking for other parties to add their support to the self-determination vote. In addition, they have stated that the taxes created with the sole aim of collecting more money will be temporary. Despite the electoral mandate, the Spanish Government totally opposes the referendum and is threatening the Catalan Executive with economic asphyxia.

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.