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Catalonia had a 2.58% deficit in 2014, more than the 1% deficit target imposed by Madrid

The Catalan Government registered a 2.58% deficit in 2014, according to the Spanish Finance Minister, Cristóbal Montoro. The Catalan Finance Minister, Andreu Mas-Colell, already unveiled this figure a few days ago, but explained that it was including the public bailout of a highway charged on 31 December 2014, as otherwise the figure would be 2.13%. In any case, Catalonia's deficit is higher than the 1% target unilaterally imposed by the Spanish Government on the Autonomous Communities. The Catalan Government protested months ago, saying that it was not a realistic target, that it was unfair since it was not in line with spending responsibilities in the management of basic public services, and that it was went against the Budget Stability Law. The Catalan Government took it to the Constitutional Court but the verdict has not been issued yet.

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27 March 2015 09:55 PM

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ACN

Barcelona (ACN).- The Catalan Government registered a 2.58% deficit in 2014, according to the Spanish Finance Minister, Cristóbal Montoro. The Catalan Finance Minister, Andreu Mas-Colell, already unveiled this figure a few days ago, but explained that it was including the public bailout of a highway charged on 31 December 2014, as otherwise the figure would be 2.13%. In any case, Catalonia's deficit is higher than the 1% target unilaterally imposed by the Spanish Government on the Autonomous Communities. The Catalan Government protested months ago against the legal levels of deficit allowed, saying that it was not a realistic target, that it was unfair since it was not in line with spending responsibilities in the management of basic public services, and that it went against the Budget Stability Law. The Catalan Government took it to the Constitutional Court but the verdict has not been issued yet. Furthermore, the Catalan Government is poorly funded, with a non-transparent inter-territorial fiscal scheme, which should have been renewed on 1 January 2014. The Spanish Government is using this to recentralise powers. On top of this, Catalans are obliged to give away a large part of their taxes to other parts of Spain. Catalonia has a greater fiscal deficit compared to the rest of Spain, accounting for some 8% of its GDP per year, equivalent to about €16 billion.


With a deficit of 2.58% of GDP, the Catalan Government surpassed the deficit of 2013 (1.96%) and 2012 (2.24%). However, the Catalan Finance Minister explained that the Spanish Government has reduced Catalonia's funding this year (reducing its revenue) and the new taxation increased its spending (such as the VAT increase). In addition, the Spanish Government did not share the revenue increase due to a better economic environment and kept all the additional money for itself, while the Autonomous Communities are those managing and funding basic public services such as healthcare and education.

The Autonomous Communities had a 1.66% deficit on average in 2014, stated Montoro on Friday. The Region of Murcia registered a 2.82% deficit; Extremadura, a deficit of 2.44%; and, the Valencian Country (also called Valencian Community), a 2.39% deficit. Spain as a whole ended 2014 with a 5.7% deficit, while the European Union had authorised a 5.8% deficit.

The Catalan Government is under-funded

Catalan representatives have been warning for decades that the Catalan Government is under-funded, taking into account the public services it manages and all the taxes collected in Catalonia. "We have a serious problem regarding revenue", highlighted Mas-Colell. Between 80% and 90% of the Catalan Government's revenue depends on the inter-territorial fiscal scheme which is totally controlled by the Spanish Government. This system expired in January 2014, but the Spanish Government refuses to review it and a new system is not expected to be in place until 2016 at the earliest. The old system was designed before the economic crisis and the Spanish Government has not adapted to its effects, despite the fact that the Autonomous Communities manage and fund the basic public services, as well the main Welfare State pillars, such as public healthcare and education.

Instead of adapting the system, the Spanish Government has launched a series of new funds, such as the Liquidity Fund for the Autonomous Communities (FLA), which give loans to regional governments (which have to be returned) instead of guaranteeing them their own revenue. This mechanism increases the Spanish Government's fiscal control on the Autonomous Communities and recentralises powers. In addition, with this system, the Spanish Government send the funds almost month by month, making the regional governments always have to wait for Madrid's transfer to be able to make the needed payments. This mechanism is far from innocuous and dramatically reduces the actual autonomy of regional governments, recognised in the Constitution.

The Spanish Government is "asphyxiating" the Catalan Executive

According to Mas-Colell, the Spanish Government is "asphyxiating the finances" of the Autonomous Communities. "If they wanted to asphyxiate the Catalan Government, they could do it tomorrow", said Mas-Colell, but "let's see if they dare to do so!", he immediately added. "The main problem is that Madrid has fallen in love with the FLA", because with it they control the Catalan Government's finances, and now they do not want to change the inter-territorial fiscal scheme, despite the old one having expired more than a year ago.

On top of this, Madrid does not always use transparent criteria and with this system, the Catalan Government receives fewer funds than those it should get. In addition, Catalonia has suffered from decades of continuous fiscal deficit, which seriously damages its economy and its public services, affecting the competitiveness of industries and families in need.

In fact, Catalans have been giving away an average of 8% of Catalonia's GDP (equivalent to some €15.5 billion using 2014 money) each year since 1986, which is money that has been spent in other parts of Spain. In 2008, the Spanish Government recognised that Catalonia had a fiscal deficit of between 6.38% and 8.7% of its GDP in 2005 (depending on the formula used), which were figures similar to those issued by the Catalan Executive. It is the only time such figures have been released by the Spanish Government, with the exception of last July, when the Spanish Finance Ministry published the results for 2011 using a totally different formula created for the occasion and after delaying the figures' publication for months due to the great controversy the issue generated.

According to Madrid's new calculations, Catalans gave away €8.46 billion in 2011, representing 4.35% of Catalonia's GDP. However, according to the formulas that have been used for years and are in line with international standards, Catalonia's fiscal deficit was between €15.01 billion and €11.09 billion in that year, lower than the average of the last decades but significantly higher than the Spanish Government's new calculations.

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  • Catalonia had a 2.58% deficit in 2014, more than the 1% deficit target imposed by Madrid (by ACN)

  • Catalonia had a 2.58% deficit in 2014, more than the 1% deficit target imposed by Madrid (by ACN)