The Catalan President announces a tax increase in 2012 and a reduction of public sector salaries to meet the deficit objective

Artur Mas, the President of the Catalan Government, has announced the main austerity measures to reduce Catalonia’s public deficit and meet the 1.3% objective for 2012. Mas stressed that these measures are to be taken in order to reduce the deficit and not harm social policies. The Catalan People’s Party was satisfied with the plans, while the Left-Wing parties warned that they would harm the middle classes. The Catalan President also sent a warning to the next Spanish Prime Minister: a new “fiscal agreement” for Catalonia might be “one of the few opportunities left” to rebuild relations with the rest of Spain.

Patricia Mateos / Rafa Garrido / Gaspar Pericay Coll

November 22, 2011 11:59 PM

Barcelona (ACN).- The Catalan President, Artur Mas, has announced more austerity measures for 2012 to meet the 1.3% deficit objective, which mainly focus on increasing revenue and reducing public sector salaries. After the weekly meeting of the Catalan Government, Mas explained the main points in next year’s budget. They mainly consist of increasing some taxes and fixed prices, as well as decreasing costs by reducing the public pharmaceutical bill and the salaries of public sector employees. On Tuesday, Mas said that the public spending cuts implemented in 2011 in order to reduce the Catalan public deficit cannot go much further without starting to affect essential social services. “If we continue to reduce spending in very sensitive areas significantly, […] we might put some of the services we consider to be essential in danger or at risk ”, he said. Mas added that if Catalonia was not forced to give so much money to poorer Spanish regions, there would not be a deficit problem and all the austerity measures would not be necessary. The Catalan President and leader of the Centre-Right Catalan Nationalists Coalition ‘Convergència i Unió’ (CiU), sent a warning message to the next Spanish Prime Minister, Mariano Rajoy: the new “fiscal agreement” for Catalonia that CiU proposes is “one of the few opportunities left” to heal “the relationship between Catalonia and Spain”. However, if Catalonia’s high solidarity levels with poorer regions are not reduced, the Catalan Government needs to meet the deficit within the current financial framework. The Catalan People’s Party welcomed the austerity measures and said they might support them if the Catalan Government listens to their proposals. However, the Left-Wing opposition parties criticised the measures, because they believe they are making the middle and working classes pay for the costs of the financial crisis. The Professional Doctor's Association of Barcelona has accepted the introduction of a “moderating ticket” in drug prescriptions, if further budget cuts in the healthcare system do not take place.

In order to continue reducing the public deficit in 2012 and meet the 1.3% objective, the Catalan Government will mainly focus on raising revenue and reducing public salaries, Mas explained. He announced an increase in certain taxes and public-fixed prices: such as the fuel tax, transport fees, water supply prices, and university fees. In addition, if the new Spanish Government does not eliminate the Wealth Tax in 2012 –which was controversially re-introduced by the current Spanish Executive earlier this year–, the Catalan Government will charge its share and benefit from the revenue generated. Besides, Mas explained that the Catalan Government will continue selling real estate assets and will also privatise the management of some public companies.

In order to reduce costs, the Catalan President announced that public salaries will be reduced. He asked public officials for a small sacrifice “as they have a job for life”. Mas confirmed that there will be a reduction in public salaries, also affecting political and high-ranked posts, who will not receive the Christmas bonus in neither 2011, nor in 2012. In addition, he stated that the pharmaceutical bill paid by the Catalan public healthcare service is too high and that a “moderating ticket” will be put in place in order “to avoid the abuse” of public-funded drug prescriptions. The President of the Catalan Government clarified that no one “will have to pay to go a hospital, a community health centre or to visit a specialised doctor”, but there will be “access barriers to avoid the overuse or even the abuse of the health system”. The Catalan Ministry of Health confirmed this afternoon they were studying possible formulas, although the definitive one is already to be decided.

Austerity measures to meet the 1.3% deficit objective for 2012

With all those measures, the Catalan Government aims to meet the public deficit objective for next year, set at 1.3% of Catalan GDP, and therefore to continue balancing the budget and send out a message of credibility to the financial markets. According to the Catalan President, more than €1 billion will be saved in 2012. Mas pointed out that since he took over office 11 months ago, he has been committed to making severe adjustments in the public finances over a two-year period, and therefore reducing the public deficit. 2012 will also be an adjustment year and, if that is carried out correctly, it will finish having accomplished all the most painful measures. Mas stressed that the public deficit will be reduced each year, and reach just a 0.14% deficit in 2018, but that after 2012, the adjustments will be more gradual.

In 2011, after the new Catalan Government took office, Catalonia already experienced a significant budget adjustment, passing from a 4.2% deficit in 2010 to a 2.66% this year. This represented saving €2.7 billion or a public spending reduction of 10% on average made in only one year, with budget cuts affecting all government areas to a different degree. In percentage points, healthcare and education were the least affected, while public works or institutional relations were the most affected. However, considering that more than two thirds of the Catalan budget goes to pay for Welfare State policies, despite their minor percentage reduction, they still experienced a significant decrease in funds. According to the Catalan President, in 2012, the recipe to reduce the budget deficit cannot be mainly based on public spending cuts, and thus the adjustment needs to affect other items.

Mas sends a warning to the next Spanish Prime Minister

The Catalan President used the press conference to send a clear message to the new Spanish Prime Minister: “the fiscal agreement might be one of the few opportunities left” to heal “the relationship between Catalonia and Spain”. The “fiscal agreement” was CiU’s main proposal in the last elections and consists of asking for a similar fiscal model in Catalonia as those in the Basque Country and Navarra. It is mainly based on the Catalan Government raising all the taxes in Catalonia and paying the Spanish State two amounts of money: one amount for all the services provided and investments made by the Spanish Government in Catalonia and another amount in terms of inter-regional solidarity (also called inter-regional equalisation). Currently, official figures state that Catalonia gives between 6.9% and 9% of its annual GDP to poorer regions in Spain every year. Other studies, made in Catalonia, talk about a range between 8.5% and 12%. This amount is known as the “fiscal deficit”. Assuming a 9% fiscal deficit, it means that every year Catalan citizens lose €18 billion to pay for services and investments made in other parts of Spain. In 2010, the Catalan Government had a public deficit of 4.2% of its GDP, and, after painful budget adjustments, it will end 2011 with a budget deficit of 2.66%. The “fiscal agreement” proposed by CiU foresees that Catalonia would continue the transfer of money to poorer regions, but not an amount that makes a rich region such as Catalonia be in a lower ranking position and unable to pay for its basic services.

Yesterday, leading members of the People’s Party (PP), but not the future Prime Minister Mariano Rajoy, said that they do not even want to listen to CiU’s proposal. The Catalan President recognised that the People’s Party won Sunday's Spanish general elections by an absolute majority, but that they should still listen to “what Catalonia asks for”. Mas stressed that the PP won all over Spain, except for Catalonia and the Basque Country. CiU won the elections in Catalonia, and that the Catalan Government run by CiU believes it is legitimate to put its proposal on the table. In addition, a few weeks ago, an opinion poll published in Catalonia found that more than 75% of Catalans want a “fiscal agreement”.

Mas asks opposition parties for cooperation to approve next year’s budget

The opposition parties had an uneven reaction to the austerity measures announced by the President of the Catalan Government for 2012. The Catalan President asked for their cooperation to approve the budget for next year, since CiU –running the Government– needs 6 MPs for an absolute majority in the Catalan Parliament. Mas stated that the budget would require an “across the board agreement”, considering the delicate financial situation. However, he mainly addressed his message to the People’s Party, since now “they share the responsibility” as they will run the Spanish Government. “It is logical we help each other out”, he said. The Catalan President explained that the budget proposal will be brought to Parliament in mid-December and he thus expected to approve the budget for 2012 in early February at the latest.

The PP welcomes the measures while the Left-Wing opposition parties criticise them

The Catalan branch of the conservative People’s Party –which won last Sunday’s Spanish Elections with an absolute majority– “was satisfied with the message sent” by Mas. Enric Millo, the Spokesperson of the People’s Party at the Catalan Parliament, said that their final support to the measures is conditioned to the details and also to how the Catalan Government reacts to their proposals in the 2012 budget. In addition, Millo welcomed the news that Mas will collaborate with them and the future Spanish Government, which will be run by the PP.

However, the Left-Wing opposition parties have been critical with the measures announced by Mas. The Catalan Socialist Party (PSC), the main opposition group at the Catalan Parliament, stated that the measures are “lineal” and “do not focus on fostering the economy and creating jobs”. “Either there is a rectification, or we do not have anything to negotiate”, said the PSC leader, Joaquim Nadal. The Left-Wing Catalan Independence Party (ERC) criticised Mas for “taxing the working classes”, and they claimed for “a fairer” fiscal system. In addition, Anna Simó, ERC’s Spokesperson at the Catalan Parliament, asked CiU to move away from the PP and start negotiating the 2012 budget among Catalan nationalists. Finally, the Catalan Green Socialist Coalition (ICV-EUiA) said that the measures announced are “democratically fraudulent”, as they have been made public after the elections. ICV President, Joan Herrera, criticised Mas for “daring [to take measures against] the working classes, but not daring with those in positions of power”.