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“Catalonia is not to be blamed for Moody’s downgrading of Spanish debt”

Experts in economics and regional fiscal redistribution concluded at a conference in London that the Spanish Autonomous Communities’ expenditure like Catalonia’s is not to be blamed for the downgrading of Spanish debt. They stated that the Catalan Government can not only be “an expenditure agency” and that it needs total control over its revenues and budget.

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11 March 2011 12:12 PM

by

ACN / Laura Pous

London (ACN).- The day Moody\u2019s rating agency downgraded the Spanish Government\u2019s long term debt, experts in regional fiscal redistribution met in London and discussed the Spanish case and, in particular, the Autonomous Communities\u2019s self-governing . Their main conclusion is that Catalonia is not to be blamed for Spain\u2019s public deficit, the accumulated public debt and the overall state of the finance sector. The think tank Chatham House organised the conference \u2018Devolution in a Globalised World\u2019. In a debate chaired by professor Alan Trench from the University College of London (UCL), experts in economics and regional fiscal redistribution discussed the Spanish model, Catalonia\u2019s fiscal autonomy and its responsibility in the rating of the Spanish public debt. According to Trench, the solution for the Spanish case is to promote a \u201Clarge fiscal devolution\u201D that would make Catalonia have a separate debt from the Spanish State administration.  Trench also thinks that Catalonia should have the capacity to collect all the taxes in relation to all the services it has to provide to the Catalan citizens.


\u201CSpain created a system in which, despite the fact that many taxes are partially devolved [decentralised] and that those tax collections finance the autonomous communities, the large part of the control is in the Central State\u2019s hands\u201D, Trench said to CNA. According to the academic, some Autonomous Communities have been transformed into \u201Cexpenditure agencies\u201D more than into governments \u201Cresponsible not only for providing services, but also for getting the money to pay for them\u201D. According to Trench, the fact that Autonomous Communities such as Catalonia do not have a total control on its funding \u201Cprovokes risks\u201D, as they have to assume an \u201Cimportant expenditure in public services\u201D, such as Education or Healthcare. \u201CThe answer to this issue is similar to the one adopted in Canada, where there is a large-level of fiscal devolution and [provinces] have the power to issue bonds into the market in their own right\u201D, emphasised Trench. To reach this solution, the Spanish State \u201Cshould be able to give away the tax collection and its competences on taxes, in order to set those according to the functional responsibilities\u201D of Catalonia.

Professor Joep Konings from the Belgian University of Leuven underlined that Moody\u2019s downgrading of the Spanish debt is \u201Crelated to market speculation\u201D. He insisted that Autonomous Communities cannot be blamed for the crisis. \u201CIt is a domino. First it was Greece, then Ireland and Portugal will be in the same situation pretty soon\u201D, explained Konings. \u201CThe next in the list is Spain\u201D, he added. \u201CI don\u2019t think it has anything to do with centralisation or decentralisation within Spain\u201D, indicated the expert in regional economies.

The chairman of the think tank \u2018Reform Scotland\u2019, Ben Thompson, thinks that neither Catalonia or the other Autonomous Communities can be blamed for decisions that, in most of the cases, have been taken by the Spanish Government. According to him, Catalonia should have a larger control over its public finances. \u201CIf we had had more responsibility at local level, in the United Kingdom we would not have ended up spending 30% more than what we collect at the central government level\u201D, he lamented. \u201CThere is a series of responsibilities that small countries need to take, and I think they carry a greater efficiency\u201D, ensured Thompson. For Alan Trench, Spain\u2019s problem is not the devolution process having gone too far, but the contrary. According to Trench, the current problems regarding regional fiscal distribution, the Autonomous Communties\u2019 funding and the Spanish public debt is that \u201Cthe constitutional reforms went quite far, but not far enough\u201D.

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  • The debate was organised by the think tank Chatham House in London (by L. Pous)

  • The debate was organised by the think tank Chatham House in London (by L. Pous)