Regional governments are responsible for less than 20% of Spain’s debt and for 33% of its 2011 deficit

In the last number of weeks, regional governments in Spain have been taking the blame for the deficit, and in the past week have done so at an international level. However, Spain’s Central Government is responsible for 63% of the country’s deficit and 75% of public debt, despite controlling less than half of public expenditure and having far greater control over revenue. Regional governments have produced less than 20% of Spain’s public debt and in 2011 were responsible for 33% of the country’s deficit, despite representing around 40% of the public expenditure total and managing the most expensive and socially-rooted policies (healthcare, education, social grants, public transportation, etc.).


January 12, 2012 11:11 PM

Barcelona (ACN).- In the last number of weeks, the Autonomous Community governments have been blamed even further for Spain’s deficit, even at an international level, and therefore agreeing with the Spanish Government and Spanish nationalists. However, simple and transparent data show that regional governments are not the only ones responsible for Spain’s deficit and debt, quite the contrary. 62% of the 2011 deficit depends on the Central Government as well as 75% of Spain’s public debt. The Central Government is behind 50% of Spain’s public spending. Regional governments control 40% of the total spending and are responsible for the main welfare policies (healthcare, education, social grants, public transportation, etc), whose costs increase in times of crisis, while revenue levels decrease. However, despite these facts, the regional governments have been blamed. Olli Rehn, European Commissioner for Economic and Financial Affairs is the latest person to blame the Autonomous Communities. At a press conference in Brussels on Wednesday he said: “It is lamentable that Spain exceeded its deficit, apparently in a quite a substantial manner, mainly because of the excessive spending of its regional governments”. Spanish nationalists have campaigned against the Autonomies and it is beginning to bear its fruits abroad. The Catalan Minister for the Economy and Knowledge, Andreu Mas-Colell, denounced these facts in an open letter to the New York Times published on Wednesday. Mas-Colell’s letter is an answer to a previous article from the American newspaper focusing on the overspending of the Autonomous Communities. Mas-Colell, who in the past was an economics professor at Harvard University, stressed in his letter that the article “placed excessive responsibility on the regions for the fiscal problems of Spain”. The Catalan Finance Minister also warned of the Spanish nationalists’ plans to alter Spain’s decentralisation, recovered after Franco’s death.

The Catalan Finance Minister addressed a letter to the New York Times’ editor, which was published in Wednesday’s edition. Mas-Colell said “the largest public budget and deficit and most of the regulatory power over fiscal and expenditure issues lie with the central Spanish administration”. Furthermore, he stressed the will and the need that both the Catalan and the Spanish governments work together and cooperate to reduce the deficit in all public administrations. “What the situation demands is a concerted effort by central and regional administrations for the success of fiscal consolidation”, he proposed, instead of using the financial crisis as a way to change Spain’s political organisation.

Spanish nationalists want to reverse Spain’s decentralisation process

The Catalan Minister for Economics and Knowledge, Andreu Mas-Colell, clearly condemned the objective of Spanish nationalists and warned of not reviewing history and thus Spain’s territorial and political organisation. Mas-Colell alerted, “The matter is a sensitive one, as not everyone in Spain is reconciled to the post-Franco transformation of the country.” He added  “there is now the temptation, with the economic crisis as an excuse, to turn back the clock.”

The Spanish Government has decided not to take the blame for Spain’s deficit and debt. And Spanish nationalists have decided to use the current debt crisis to push for a recentralisation of the country, taking powers away from the Autonomous Communities.

Data clearly show that the Autonomies are not the main administration responsible for Spain’s financial problems

Data clearly show that the blame should be taken by the Central Government, and not the Autonomies. In 2011, the autonomous communities will have a public deficit of 2.7%, according to the latest data released by the Spanish Government. The Central Government will have a deficit of 5%, almost double that figure. Overall, Spain will have a 8% public deficit (the rest corresponds to local and municipal governments). The Central Government manages 50% of public spending in the country and the regional governments around 40%, although some such as Catalonia’s manage a larger quantity as they have more devolved powers. In addition, regional governments manage the most expensive and socially-rooted policies (healthcare, education, social grants, public transportation, etc.), which are very difficult to cut from one year to the next and whose costs increase in times of crisis. Furthermore, regional governments have limited control over revenue, as they have very limited fiscal autonomy and depend on Spanish Government transfers –which are not always made despite the legal obligation to do so-. On the contrary, the Spanish Government has much more room to control its revenue, and also its spending. Despite these facts, the Spanish Government is responsible for 75% of the country’s public debt, while the Autonomous Communities share represents less than 20%.