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The European Commission and the Spanish Government insist that Catalonia must meet the 1.5% deficit target

The Catalan Government stated it will meet the 1.5% deficit target for the Autonomies, although it considers it to be abusive considering they manage the main public services and the Spanish Government has kept for itself all the flexibility allowed by Brussels. In addition, the Catalan Government and the Catalan economy suffer from a perpetual lack of investment by the Spanish Government, which takes away 8.5% of Catalonia’s GDP each year, a quantity much higher than the deficit target. The day after Catalonia’s request for €5 billion from the Liquidity Fund, there was no recognition of Catalonia’s fiscal deficit at a Spanish or European level. There were only calls to continue with the austerity efforts. However, the Catalan Government warns of a “serious problem” if the Liquidity Fund is not in place on time by September.

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29 August 2012 11:27 PM

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ACN

Barcelona (ACN).- The day after the Catalan Government asked for \u20AC5.02 billion for debt restructuring payments in the coming months, it faced a tough response from the European Commission and the Spanish Government. They both insisted this Wednesday that Catalonia must meet the 1.5% deficit target this year and did not recognise Catalonia\u2019s fiscal contribution to pay for services and investments in the rest of Spain, as Spain\u2019s richest Autonomous Community and as a net contributor to the European Union budget for decades. However, the Spanish Minister for the Economy, Luís de Guindos, \u201Cdid not have any doubts\u201D that Catalonia will meet the 1.5% deficit target. In fact, the Catalan Government insisted it will meet the deficit targets as previously agreed when it presented its austerity plan for 2012-2014. However, it was refusing \u201Cany political conditions\u201D. The Catalan Government insisted yesterday that the money they are asking for comes from Catalan taxpayers managed by the Spanish Government, since Catalan taxpayers give away \u20AC17 billion each year to the rest of Spain, equivalent to the 8.5% of Catalonia\u2019s GDP. Furthermore, it laments the fact that the Liquidity Fund is not in place yet, not even the details how it will work are known, despite having been announced weeks ago. The Spokesperson for the Catalan Government, Francesc Homs, stated this Wednesday that if the Liquidity Fund is not in place by September \u201Cthere will be a serious problem\u201D to honour impending payments.


The Spanish Minister Luís de Guindos stated this Wednesday that the main condition to access the money from the Liquidity Fund was to meet the 1.5% deficit target for the Autonomies. However he also stated that the Spanish Government \u201Crecognises the efforts [to reduce the deficit] made by the Catalan Government\u201D and it \u201Cdoes not have any doubts that it will continue to make the necessary efforts in order to meet the 1.5% deficit of this year and the one set for next year\u201D.

The European Commission\u2019s Spokesperson for Economic Affairs, Simon O\u2019Connor, said that it \u201Cnotes down the Catalan Government\u2019s announcement to request assistance\u201D. The EC emphasised that \u201Cthis petition is linked to strict fiscal conditions\u201D, and stressed that the Catalan Government will have to meet the 1.5% deficit target for 2012.

The Spanish Government keeps most of the deficit allowed for itself

The Catalan Government has been saying it will meet the 1.5% deficit target. In fact, it was the first Autonomy to adopt drastic budget cuts a year and a half ago. However, the Catalan Finance Minister, Andreu Mas-Colell, has said on many occasions that he considers the 1.5% deficit target to be abusive. Mas-Colell, who was an Economics Professor at Harvard and Berkley universities, has been insisting that the Autonomous Communities should have higher deficit targets in order to smooth the effects of the austerity measures on the population. The Autonomies exclusively fund and manage the main public services such as healthcare, education and social policies, being responsible for almost 40% of Spain\u2019s public spending. However, in 2012 they are only allowed a 1.5% deficit target, imposed by the Spanish Government, run by the People\u2019s Party (PP). The European Union granted Spain a more flexible deficit target for 2012, setting the new objective at 6.3% of the country\u2019s GDP. However, the Spanish Government kept all the flexibility allowed by Brussels for itself and obliges the Autonomies to implement drastic budget cuts.

Asking for \u20AC5 billion but funding \u20AC17 billion worth of services and investments in the rest of Spain

The Catalan Government has already implemented five waves of budget cuts and ended 2011 with an official deficit of 3.72% (although if the Spanish Government had paid the money it legally owed Catalonia in 2011, the Catalan Government\u2019s official deficit would have been 3.29%). This means that in order to meet the 1.5% objective, the Catalan Government will have to cut \u20AC4.3 billion this year. In this situation, the vast majority of the Catalan society (more than three quarters) insists that Catalonia cannot contribute each year 8.5% of its GDP to pay for services and investments in the rest of Spain. This means that Catalan taxpayers give away \u20AC17 billion each year, an amount four times larger than the budget adjustment needed in 2012. Catalan society wants to continue contributing to fund poorer regions in Spain and Europe, but not to the current extent. If Catalonia\u2019s contribution was halved, Catalan citizens would have more than \u20AC8 billion each year to fund its public services and infrastructures, and the Catalan Government would likely not have had a \u20AC7 billion deficit in 2011.

No recognition of Catalonia\u2019s solidarity contribution

Instead, Catalonia, with an economy the size of Portugal and the largest within Spain, does not see this fiscal effort recognised, neither by the Spanish Government, the European Commission nor other Autonomies. The latest example of this lack of recognition arrived today from the President of Galicia\u2019s Government, Alberto Nuñez Feijóo, who will face regional elections in less than two months. Feijóo stated that \u201Ctoday Galicia pays and Catalonia asks for money\u201D. Within Spain\u2019s fiscal redistribution scheme, Galicia is one of the Autonomies that receives more money from the State than the money it , which is the opposite to Catalonia.

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  • The Spanish Minister for the Economy, Luís de Guindos (by J. R. Torné)

  • The Spanish Minister for the Economy, Luís de Guindos (by J. R. Torné)