The Autonomies and the Spanish Government agree on a set of measures to guarantee the deficit commitment and liquidity

The Spanish Government stressed that no Autonomous Government will be left disappointed if they have a “responsible” attitude and have an austerity plan in place. However, those failing these measures could be intervened the same way “the European Union” has done with countries such as Greece and Ireland, but without “having their powers taken away”, clarified the Spanish Finance Minister, Cristóbal Montoro. The Autonomous Community governments have renewed their 1.3% deficit objective for 2012 and the Spanish Government has offered additional tools to raise funds and solve liquidity issues. The Catalan Finance Minister, Andreu Mas-Colell, has met bilaterally with Montoro to foster cooperation and discuss the Catalan Government’s claims about the €2.2 billion the Spanish Government owes Catalonia.

CNA / Gaspar Pericay Coll

January 17, 2012 11:48 PM

Madrid (ACN).- The Spanish Government will help Autonomies with liquidity difficulties and problems accessing international financial markets if they have a serious austerity plan in place and respect the 1.3% public deficit objective for 2012. However, the Spanish Government could oblige those failing to meet the deficit objective to do so by intervening in their economies, which “by no way” would represent taking away their devolved powers, clarified the Spain’s Finance Minister, Cristóbal Montoro. The Spanish Government met with the Fiscal and Financial Policy Council (CPFF) in Madrid on Tuesday. The 15 Autonomous Community governments that do not raise their own taxes (all except the Basque Country and Navarra) discussed the new Budget Stability Law. Catalonia already approved it in 2011, and is stricter than the national law proposed by the Spanish Government within the CPFF. At Tuesday's meeting, the Spanish Government and Autonomies reached “a commitment of State” to control the public deficit and show institutional cooperation and co-responsibility. The Autonomies exposed their liquidity problems, resulting from a drop in revenue due to the economic slowdown and their difficulties accessing the financial markets. Several days ago the Autonomies, including Catalonia, asked the Spanish Government to allow Spain’s Institute of Official Credit (ICO) to offer loans, which would have a lower interest rate than those from the international financial markets. Montoro confirmed that the ICO would offer the Autonomies credit lines to ease and speed up their payments to service providers in order to avoid harming companies and thus an economic recovery.

Catalonia, satisfied with the meeting but with still some financial claims pending

The Catalan Finance Minister, Andreu Mas-Colell, was particularly satisfied with the CPFF and the possibility to use the ICO for lower interest credits to pay service providers. Besides, Mas-Colell and Montoro had previously met bilaterally to talk about Catalonia’s claims, its financial situation and the austerity measures implemented in the past year and those planned for 2012. Two of the Catalan Government’s main claims are to receive the €2.2 billion the Spanish Government legally owed Catalonia in 2008 and 2011, which has still not been paid. However this particular issue has not been discussed within the CPFF explained Mas-Colell.

“We will help those Autonomies in need” and have an austerity plan in place, stated Rajoy

The Autonomies and the Spanish Government have re-engaged their commitment to meet the deficit objective for 2012, and have stressed the fact they are all, including local government, in the same boat. “We are all the State”, Prime Minister Mariano Rajoy said, after holding a meeting with the European Council’s President Van Rompuy. Both leaders met for the first time after Rajoy took office three weeks ago, and discussed Spain’s austerity measures and financial situation. In the press conference given afterwards, Rajoy solemnly announced that no regional government will be let down, as “autonomies are part of the State”. “We will help those Autonomies in need” with the condition they have an austerity plan in place to meet the deficit objective, stated Rajoy.

Spanish regional governments renewed their commitment to reach a 1.3% deficit objective

At the CPFF, the Autonomies renewed their commitment to reach a 1.3% deficit objective. After the meeting, the Spanish Finance Minister, Cristóbal Montoro, said that those Autonomies failing to reach the deficit objective because of irresponsible behaviour could be “intervened by the Spanish Government”. Montoro quickly clarified that the intervention did not mean “by any way” taking away devolved powers from the regional governments’ hands, but to intervene “as the European Union does”, only from a budget stability perspective and not deciding on political priorities and programmes.

The political intervention of Autonomies is not on the table, ensures Montoro

In Catalonia, many feared that using budget stability as an excuse could lead the Spanish Government to impose political control on the Autonomies’ budgets, which could break the autonomy principle stated in the Spanish Constitution. The fear came from an interview in the Financial Times by Spain’s new Minister for Economy, Luís de Guindos, published two weeks ago. De Guindos said that the Spanish Government could oblige the Autonomies to ask for the approval of their budgets. However, in the last few days, Spain’s Vice President Soraya Sáenz de Santamaría and Cristóbal Montoro have reduced the intervention levels to financial supervision of the deficit commitment. Sáenz de Santamaría explained “it will not say how to spend the money, but set a spending limit”. The Catalan Government was on guard because of this threat and initially refused the measure for this reason. However, the Catalan Government wants the European Commission to supervise its budget, and does not oppose the Spanish Government to do so if the supervision deals only with budget stability. The Catalan Government has already approved its own budget stability law that sets a 0.14% deficit ceiling to be reached in 2018, two years earlier than what is foreseen in Spain’s budget stability law that is being discussed at the moment.