Every party in Catalonia, including the PP, asks for more proportional deficit targets in 2012

There has been a unanimous call in Catalonia for greater flexibility of the deficit objectives applied to the Autonomous Communities for the current year. Every political party in Catalonia, including the People’s Party (PP), has asked the Spanish Government to provide more flexibility to the Autonomies, which manage 40% of Spain’s public spending and run basic Welfare State services. The Spanish Government has set a new deficit target of 5.8% of Spain’s GDP for 2012; internally, the Central Government allowed itself a deficit of 4% and ordered the Autonomies to commit to a deficit of 1.5%. Some Catalan parties have said that the Spanish Government has double standards.

CNA / Gaspar Pericay Coll

March 5, 2012 11:31 PM

Barcelona (ACN).- On Friday, Spain’s Prime Minister Mariano Rajoy, from the Conservative People’s Party (PP), announced Spain would not meet the 4.4% deficit target previously agreed at European Union level, but instead it would end 2012 with a total deficit of 5.8% of Spain’s GDP. Internally, the Spanish Government decided to split the 5.8% deficit the following way: the public sector directly managed by the Spanish Government was allowed to increase from a 2.8% deficit target to 4%, the Autonomous Communities were given room to rise from a 1.3% deficit to 1.5% and local governments had to stick to a 0.3% deficit. The Spanish Government gave itself a flexibility that represents 1.2% of Spain’s GDP (an adjustment of some €14 billion), and only gave the Autonomous Communities 0.2% more (an adjustment of some €2.3 billion). The Spanish Government has given itself 6 times more room than it has given the Autonomies. Considering the Spanish Government manages around 50% of all of Spain’s public spending and the Autonomous Communities about 40%, managing basic Welfare State services such as healthcare, education and social policies, all political parties in Catalonia, including the PP, have asked the Spanish Government for more flexibility for the Autonomous Communities. They are not asking for an increase of the global deficit target but for a more proportional split of the public deficit targets within Spain, in line with the spending responsibilities the Autonomies have and the services they provide citizens. Andalucía’s Government (managed by the Spanish Socialist Party) has also subscribed to the petition. The rest of the Autonomies remain silent. They are either controlled by the People’s Party or they have a different funding model, which gives them more autonomy (the Basque Country and Navarra). The Spanish Government does not want to discuss giving the Autonomous Communities more flexibility. The Spanish Minister for the Economy, Luis de Guindos, said on Monday that “an equitable distribution of the adjustment” has already been made. Furthermore, the Spanish Finance Minister, Cristobal Montoro, said that “it is not in the interest of any Autonomous Community to ask for greater flexibility” regarding the fulfilment of their deficit targets for 2012. However, the Catalan Government has said it would ask the Spanish Government for more flexibility on Tuesday, aiming to end the year with a 1.7% deficit. Over the weekend, the Catalan Government celebrated the “united reaction of all Catalan parties” claming for greater flexibility.

Prime Minister Mariano Rajoy set a new deficit target for Spain’s public sector, increasing from the previously agreed 4.4% to 5.8% of the country’s GDP. The decision took many in Brussels by surprise, especially the European Commission and some EU governments that hours earlier had refused to review the deficit targets. Rajoy, in a press conference held in Brussels minutes after last Friday’s European Council, stressed his commitment to a deficit reduction, falling from an 8.5% deficit in 2011 to 5.8% in 2012. However, he said he could not go further in only one year due to the recession and the high deficit he found when he took office two months ago. Furthermore, he said the decision respected the recently signed treaty and related agreements, since they foresee modifications of the deficit target in case of recessions. Finally, he said the Spanish Government was “sovereign” to decide on its own budget and had the obligation to represent the interest of Spanish citizens.

The EC threatens Spain with fines and Rajoy re-affirms Spain’s sovereignty

The European Commission had refused a revision of the previously agreed deficit targets.  Rajoy’s announcement made the Commission feel bypassed and on Monday it threatened Spain with a fine if it does not commit to the 4.4% deficit objective for the current year. However, on Monday Rajoy said once again that he “will do what [he] thinks is logical, sensible and reasonable” in 2012 to reduce the deficit. He also stated that he is “not obliged to agree Spain’s deficit with the European Commission”.

The Catalan Government to ask for a 1.7% deficit target

In Catalonia, Rajoy’s announcement was received with a mixed reaction. On the one hand there was a broad consensus asking for greater flexibility of the deficit targets in order not to asphyxiate the Welfare State policies and economic activity. Therefore, Catalan parties celebrated and backed Rajoy’s decision to allow Spain more room regarding the total deficit figure. However, on the other hand, they completely disagree on the way the 5.8% deficit is split among the different government levels. Absolutely all parties in Catalonia, no matter if they represent the left or right, or if they are closer to Catalan Nationalism or Spanish Nationalism, have asked for greater flexibility for Catalonia’s deficit targets for 2012. The Spanish Government increased the limit from 1.3% to 1.5%. Catalan nationalist parties went further and spoke about double standards, since the Spanish Government has given itself 6 times more room than it has given the Autonomous Communities.

It is expected that this Tuesday, the Catalan Finance Minister, Andreu Mas-Colell, will ask the Spanish Government for raising Catalonia’s deficit target to 1.7%. Catalonia ended 2011 with a 3.29% deficit, according to the Catalan Government. The 2010 deficit represented 4.22% of Catalonia’s GDP.