Catalan Government feels “strong” after the Spanish State’s threat to intervene in Catalonia’s budget

In an interview with the Financial Times this weekend, the Prime Minister Zapatero threatened to intervene in some Autonomous Communities’ budgets. Today the Spanish Secretary for Economic Affairs reiterated this threat. However the Catalan Government has stressed that Catalonia has in fact no problem with its public deficit. Catalan political parties reminded the Spanish State that the Autonomous Communities only have one sixth of the entire public debt throughout Spain.

R. Pi / X. Alsinet / G. Pericay Coll

January 18, 2011 11:56 PM

Barcelona (ACN) .- Since this weekend, when the Spanish Prime Minister told the Financial Times that he would intervene in the Autonomous’ Communities budgets if they were not fulfilling the deficit reduction criteria, a debate exploded in Spain. Yesterday, the Catalan Government’s Spokesperson Francesc Homs ruled out any possibility of the Spanish Government intervening in its deficit. Today, the Spanish Deputy Minister for Treasury replied back emphasising that the Spanish Government could limit Catalonia’s capacity to increase its debt. In October, the Catalan Government, controlled then by a Left-Wing coalition including the Socialist Party, issued treasury bonds to finance its debt. In the last two months, it was made known that Catalonia’s public deficit for 2010 would be higher than thought, reaching 3.6% of its GDP. The Catalan Government, governed now by the Centre-Right Catalan Nationalist Coalition (CiU), stated that “it feels strong” when faced with this “pushing” from Madrid. They also stated that the current situation is the responsibility of the Socialist Party, which not only ruled the Spanish Government but also Catalonia until last Christmas.

According to the Spanish Deputy Minister for Treasury Carlos Ocaña, if Catalonia’s deficit is higher than expected, “as it seems it will be”, the Spanish Government could impede Catalan Government to get new credits. Ocaña’s objective is to stop Autonomous Communities increasing Spain’s overall public debt and deficit. However, the Autonomous Communities saw their revenues decrease substantially this year and they are responsible for some 40% of the public expenditure and manage highly costly services like Healthcare and Education. In addition, their deficit is much lower than the Spanish Government’s.

The Catalan Government’s Spokesperson Frances Homs recalled that the Spanish Government set the deficit limit for the Autonomous Communities unilaterally. He also stressed that it controls their funding, as Catalonia cannot freely decide how it funds itself and contributes with more than 10% of its annual GDP to the funding of the rest of Spain. Therefore, if the Autonomous Communities do not have enough funds now and their budgets have deficit, it is a situation “for which Mr. Ocaña is also responsible”, said Homs. Homs criticised on Monday the attitude of the Spanish Government calling it “dishonest” because the Spanish Governement made all the decisions that generated spending for the regions. Homs added that “decisions are made from Madrid that make the Autonomous Communities generate spending and now they point the finger at the Communities because they are spending”.

All the Catalan political forces except for the Conservative and Spanish Nationalist People’s Party (PP) and the Populist Party Ciudadanos (C’S) recalled that Autonomous Communities represent a small part of Spain’s public debt, which is not very large compared to other European countries such as the UK, Italy or even Germany. Spain’s public debt is around 600 billion euros, from which 100 billion are from the Autonomous Communities. They also stated that the Spanish Government’s deficit for 2010 is 3 times higher than the Autonomous Communities’.