The Catalan Government delays ordinary payments in September due to not receiving Spain’s €560 million on time

The Spanish Government states that the money will “start to arrive” next Tuesday. Over the past few weeks, the Catalan Finance Minister has warned about the urgency of receiving the requested €560 million from the Liquidity Fund for the Autonomous Communities (FLA) in order to face all September’s payments. However, the Spanish Government has sent €400 million to pay debt maturities but has not sent the remaining €560 million to pay private health, education and social centres that receive regular funds from the Catalan Executive. All direct salaries have been paid, but not other payments. In August, the Catalan Government requested €5.02 billion from the FLA for the entire year 2012 in order to face debt maturities and ordinary payments, since access to international markets is closed to the Autonomous Communities.


October 6, 2012 01:00 AM

Barcelona (ACN).- The Catalan Government has delayed the payment to private health, education and social centres that receive public funds since it has not received the requested €560 million from the Spanish Government yet. All direct salaries have been paid but other payments have been delayed, according to the Catalan Executive. The Spanish Government has transferred the €400 million to pay Catalonia’s debt maturities, but it has not done so with the €560 million to face ordinary payments. The Spanish Finance Ministry confirmed to ACN on Friday evening that the money “will start to arrive” on Tuesday. This amount is part of the 5.02 billion the Catalan Government requested at the end of August from the Spanish Government’s Liquidity Fund for the Autonomous Communities (FLA) to face debt maturities and ordinary payments. Since the Autonomous Communities cannot get funds from the international financial markets at a sustainable interest rate, the FLA was created to act as a sort of bank providing the needed liquidity. However, the FLA was only put in place in September by the Spanish Government, despite having been announced in the early summertime. In fact, in the past few weeks, the Catalan Finance Minister, Andreu Mas-Colell, has warned about the urgency to activate the FLA. Furthermore, last week he insisted on the need to receive the requested €560 million on time to be able to honour the payments to private centres receiving public funds, although he guaranteed the regular payment of salaries.  The signature of the agreement to transfer the €560 million did not take place until Friday morning.

The Spanish Government told ACN that the €560 million will “start to arrive” on Tuesday, since the formal agreement between the Spanish Official Loan Institute (ICO) and the Catalan Executive was only signed this Friday morning. However, the Catalan Government had been warning about the urgency to transfer these resources for some weeks. The Catalan Executive requested from the FLA €960 million corresponding to the September payments; €400 million of which were to pay for debt maturities. The Spanish Government has transferred the €400 million that were going directly into the international financial markets but not the amount going to privately-owned health, education and social centres.

Last July, the Catalan Government had also liquidity problems and delayed the transfer of funds to the same privately-owned health, education and social centres, which have an agreement to get public funds. In fact, this payment is still pending. The Catalan Minister for Social Affairs already warned the affected social centres that the payment depended on receiving the money from the FLA. Furthermore, he also warned them that September’s payment might be also delayed if the Spanish Government did not transfer the funds from the FLA on time.

Needing €5.02 billion in cash while transferring between €12 billion and €17 billion to the rest of Spain

The Catalan Government has been paradoxically obliged to apply to the Spanish Government for funds from the FLA, while Catalan taxpayers are those contributing the most to pay for investments and services made in the rest of Spain. Furthermore, Catalan citizens and companies suffer from a permanent lack of investment in Catalonia by the Spanish Government that severely affects its public services and economy. In addition, there is a broad consensus in Catalonia among the political class, main business associations and civil society organisations that the Catalan Government suffers from a lack of funding under Spain’s current fiscal scheme. The result is that Catalonia, despite being the richest Autonomous Community in Spain, has problems fully funding the basic Welfare State services it provides its citizens, such as healthcare, education, social services, police and prisons.

With data from 2009, Catalan taxpayers only received 57 cents back from each euro paid in taxes in the form of investments or services. According to official data released by the Catalan Government, between 1986 and 2009, Catalonia has been giving an average of 8.5% of its GDP to pay for services and investments made in the rest of Spain (calculated using the monetary flow formula). The Spanish Government has only released this sort of data once, in 2008, with data from 2005. It showed that Catalonia had a fiscal deficit of between 6.38% and 8.70% of its GDP, depending on the formula used. The amount in 2005 represented a fiscal redistribution total ranging from €10.86 billion to €14.81 billion respectively. Nowadays, it could represent a total of almost €17 billion. This imposed solidarity effort is judged to be excessive by a large part of the Catalan society, which would like the fiscal deficit to be reduced and limited, especially when essential infrastructures are not built and public services are under-budgeted in Catalonia.

This structural deficit turns into the Catalan Government’s deficit that, after many years, has left Catalonia with the largest amount of debt among Spanish Autonomous Communities, with €43.95 billion (data from last June). However, looking at Spain’s total public debt, the Autonomous Communities have only generated a fifth of the debt, despite being responsible for almost 40% of all the public spending and the exclusive management of the Welfare State service apart from unemployment grants and pensions.