Catalan parties meet to discuss a new fiscal agreement with Spain

The President of the Catalan Government has organised a summit with all the parties at the Catalan Parliament to discuss a new fiscal scheme for Catalonia. According to official studies, Catalonia gives 8.5% of its GDP each year to pay for investments and services in the rest of Spain, an amount that represents more than €17 billion per year. Some parties state that the current model is unsustainable for Catalonia and represents a plundering of its finances. Others have a more moderate opinion. Nonetheless, all political parties in Catalonia now believe that this amount is excessive and that the fiscal scheme between Catalonia and the rest of Spain should be reviewed. However, they significantly disagree on the formula and the timing.

CNA / Gaspar Pericay Coll

May 31, 2012 01:59 AM

Barcelona (ACN).- All the political parties with representation at the Catalan Parliament met on Wednesday afternoon in a summit to discuss a new fiscal agreement between Catalonia and the rest of Spain. Even though a new fiscal agreement was the main electoral proposal of the Centre-Right Catalan Nationalist Coalition (CiU), the issue has become one of the main debates in Catalan politics in the last year. The reason being that the Catalan public finances are under severe stress due to the economic and financial crisis, but also because every year Catalonia gives away around €17 billion, according to official studies published by the Catalan and Spanish Governments. This represents that annually Catalonia gives 8.5% of its GDP to pay for investments and services in the rest of Spain following the inter-regional solidarity and redistribution principles. However, most of the Catalan parties consider this amount to be excessive and would like to continue following the solidarity principle, but reducing Catalonia’s contribution. This option is supported by 76% of Catalan citizens according to the latest polls. In fact, all Catalan parties now agree that Catalonia contributes too much, but they disagree on the timing and of what should be the formula of the fiscal relation between Catalonia and Spain. A minority would like to postpone this debate until the economic crisis is left behind, while the majority consider this issue to be urgent, as the crisis has made the situation even more unsustainable. Regarding the formula, a majority of parties would like Catalonia to raise all its taxes and have a bilateral relation with the Spanish Government, as the Basque Country and Navarra already have. Others would only accept a fine-tuning of the current model.

The President of the Catalan Government and CiU’s Chairman, Artur Mas, organised the meeting, which was attended by the leaders of all parties. As expected, no agreements were reached. The summit had been organised to exchange views, identify common ground and work on a joint initiative with as many parties as possible. In a few weeks, the Catalan Parliament will decide on a fiscal agreement proposal, which later would have to be negotiated with the Spanish Government. The proposal would very likely be approved in the Catalan Parliament with the votes of CiU and another party, but Mas knows that without very wide support, it will fail in Madrid. However, by making concessions to add the main opposition party, the Catalan Socialist Party (PSC), or to get the People’s Party (PP), which runs the Spanish Government, not to block the initiative, Mas risks losing the support of the Left-Wing Catalan Independence Party (ERC). In addition, if negotiations in Madrid fail, Catalonia’s political scenario might become more complicated; the way to follow would be uncertain (CiU itself has doubts about a possible ‘plan B’) and Catalan society’s frustration regarding the relationship with Spain would increase. Nonetheless, the Spanish Government and Spain’s two main political parties (PP and PSOE) are reluctant to a special fiscal agreement for Catalonia, although they openly support that of the Basque Country and Navarra.

The summit was held behind closed-doors at the Catalan Government’s Palace and lasted three hours. nBefore the meeting, the Catalan President had proposed to discuss four main points, in the following order: a diagnosis of the current fiscal scheme; drafting a new scheme aside the current model; the key aspects of this new model, and the negotiating strategy in Madrid. In addition, three working documents were offered: two reports made by two advisory bodies of the Catalan Government and the so-called fiscal balances, which are the calculation of Catalonia’s contribution to Spain’s inter-regional fiscal scheme and what it gets back.

Catalonia gives to the rest of Spain 8.5% of its GDP each year

These fiscal balances, as aforementioned, show an annual fiscal deficit corresponding to 8.5% of Catalonia’s GDP, which represents around €17 billion. In 2011, the Catalan Government had a budget deficit of some €7 billion, while Catalonia gave away around €17 billion following the solidarity system. Furthermore, in 2012, the Catalan Government will have to make a budget adjustment of some €4 billion, involving drastic reductions in public spending, as it already did in 2011. Most of the Catalan Government’s spending goes to fund basic Welfare State services, as Spain’s Autonomous Communities governments exclusively manage healthcare, education and social policies. In addition, Catalonia has additional powers and manages other basic services such as police and prisons.

The Catalan President proposed to celebrate another summit in the coming weeks

At the exit of the meeting, the Spokesperson for the Catalan Government and Secretary of the Presidency, Francesc Homs, who was also present at the summit, explained that the Catalan President would like to celebrate another meeting in the next two months, before the debate at the Catalan Parliament. In addition, public and private bilateral meetings would continue in order to work on a common initiative with as many parties as possible. Homs explained that the Catalan President had proposed to create a working group, with a decision capacity, to negotiate with the Spanish Government. Homs coincided with CiU’s Secretary General, Josep Antoni Duran i Lleida, in emphasising the willingness of the PSC to reach an agreement. However, Duran lamented that the PP insisted in only fine-tuning the current model, refusing to a model change and a bilateral relationship between Catalonia and the Spanish Government.

The PSC brought a working document identifying common ground

The PSC came to the meeting with its own working document. In fact it was the only party that came with a written proposal. The PSC’s Secretary General, Pere Navarro, explained that they wanted to push for an agreement with which all Catalan parties “feel comfortable”. In its document, the PSC proposes a “singular model”, based on a “bilateral” relationship between Catalonia and the Spanish Government, and with “the Catalan Government leadership managing, collecting, liquidating, and inspecting” all the taxes. Navarro emphasised that they want to include all the parties.

The PP defends a “singular” scheme for Catalonia but always within the current model

However, the second main opposition party, the People’s Party (PP), which runs the Spanish Government and controls the Spanish Parliament with an absolute majority, wants a slight improvement of Catalonia’s fiscal situation, but within the current model. This means that Catalonia would not have a specific economic or fiscal agreement (as Navarra and the Basque Country already have since 1978) and that Catalonia would not have a bilateral relationship with the Spanish Government. The PP’s leader in Catalonia, Alícia Sánchez-Camacho, defends a “third way”, which would be to create some sort of singular scheme for Catalonia but always within the current model, which is common to all the Autonomous Communities, except Navarra and the Basques Country. Sánchez-Camacho was satisfied with the meeting, as the Catalan Government “has abandoned confrontation ”. However, she asked to abandon some “red lines”. The PP would consider abstaining at the Catalan Parliament and playing a key role negotiating with the Spanish Government.

ICV-EUiA claimed a proposal from 2005, voted by 90% of Catalan MPs at the time

The Catalan Green Socialist and Communist Coalition (ICV-EUiA) claims that if the fiscal agreement is reached, the funding improvement should be allocated to social policies and growth policies. The leader of ICV-EUiA, Joan Herrera, wants this compromise in order to support the initiative. However, he lamented that CiU refused to discuss this condition at the summit. Besides, Herrera asked the PSC to abandon its current proposal and support the fiscal model included in the Catalan Statute of Autonomy’s version, approved in 2005 by the Catalan Parliament with the support of 90% of Catalan MPs at the time, including the PSC. This model foresaw a Catalan Tax Agency, entirely managed by the Catalan Government, which would collect all taxes in Catalonia. Now the PSC talks about creating this agency but managed by a consortium between the Catalan and Spanish Government, but with “Catalan leadership”.

ERC will only accept a specific economic agreement, similar to the Basque Country’s

The leader of the Left-Wing Catalan Independence Party (ERC), Oriol Junqueras, asked the PSC what exactly it was referring to with a tax agency with “Catalan leadership”. Junqueras warned that ERC will not accept any fiscal agreement that represents less autonomy than the Basque Country’s or Navarra’s, with a bilateral relationship with the Spanish Government and in which Catalonia collects all its taxes. Junqueras emphasised that giving up this claim would end up in failure.

SI and C’s disagree, but for complete opposite ideas

The minority parties forming the Mixed Group at the Catalan Parliament, refused the idea of the fiscal agreement, but for completely opposite ideas. The radical Catalan Independence Party (SI) considers that the fiscal agreement is not the way forward. Independence is the only answer for them. SI’s Secretary General, Uriel Bertran, stated that the fiscal agreement’s proposal should not include any solidarity quota with the rest of Spain, and that if the Spanish Government does not accept the proposal, the Catalan Government should unilaterally declare independence. At the other extreme, the populist anti-Catalan Nationalism Party (C’s) accused the PSC and the PP of following CiU’s agenda. In addition, the President of C’s, Albert Rivera, said that Catalonia’s new fiscal scheme should be negotiated from the start with the Spanish Government and the rest of the Autonomous Communities, or “it will be a failure”. Rivera said that the rest of the Autonomous Communities should share the model. However, Rivera believes that this is not the Catalan Government’s intention and is convinced that the proposal will end up in failure.