The Spanish Government raises the deficit target for the Autonomous Communities from 0.7% to 1.2% for 2013
The deficit target for Spain’s entire public sector has also been raised from 4.5% to 6.3%. The Spanish Government has kept 81% of the deficit for itself while it is only responsible for 50% of Spain’s public spending. The Spanish Government has allowed itself a 5.1% deficit target, while the Autonomous Communities are only allowed a target of 1.2%. The regional governments fund the basic welfare state services and manage more than 35% of Spain’s total public spending. The Catalan Government welcomes the revision but considers it not to be enough. The Catalan Finance Minister, Andreu Mas-Colell, has been insisting that the Autonomous Communities should have at least a third of the total deficit. Therefore, with an overall target of 6.3%, the Catalan Executive should have a target at least 2.1%.
Barcelona (ACN).- The Spanish Government announced on Friday that it was raising the deficit targets for the Autonomous Communities from 0.7% for 2013 to an objective of 1.2% in order to give them more room to balance their budgets, considering the economic recession. The deficit target for Spain\u2019s entire public sector has also been raised from 4.5% to 6.3%. The decision also affects the deficit objectives until 2016, when Spain expects to post a 2.7% total deficit, meeting the European Union requirements. Today the European Commission stated that it considered the fact that the Spanish Government decided \u201Cto delay the correction of the excessive deficit until 2016\u201D to be \u201Ccoherent\u201D. However, the Commission did not mention the internal split of deficit targets among government levels, despite the previous Catalan petitions on this issue. For 2013, the Spanish Government has allowed itself a 5.1% deficit target, which is split as 1.4% for Social Security and 3.7% for the Spanish Government Departments. This means the Spanish Government has kept 81% of Spain\u2019s total deficit target for itself while it is only responsible for 50% of Spain\u2019s public spending. The regional governments, which fund the basic welfare state services and manage more than 35% of Spain\u2019s total public spending, have only been allowed 19% of the deficit (a 1.2% target). The Catalan Government is asking for greater flexibility as the new target \u201Cis not enough\u201D. The claim is backed by most of the opposition parties in Catalonia. In addition, Catalonia has a permanent fiscal deficit with the rest of Spain, which official studies calculate represents an average of 8.5% of the Catalan GDP each year. This means that annually around \u20AC17 billion of Catalan taxpayers\u2019 money are given away, while the Catalan Government posted a \u20AC4 billion deficit in 2013, after severe budget cuts in all the departments including healthcare and education. On top of this, on Friday the Spanish Government also announced a \u20AC1 billion reduction in funds for the Autonomous Communities.
The Spanish Finance Minister, Cristóbal Montoro, announced that in 2014 the Autonomous Communities will have to decrease from a deficit of 1.2% in 2013 to a deficit of 1%. In 2015, the deficit target will be 0.7% and in 2016 it will be 0.2%. The Spanish Government has given itself a 5.1% target in 2013 (3.7% for the government departments and 1.4% for Social Security), 4.5% in 2014 (3.5% for the departments and 1.0% for Social Security), 3.4% in 2015 (2.8% and 0.6%) and 2.5% in 2016 (2.0% and 0.5%). Meanwhile, the entire Spanish public sector will have to meet a 6.3% deficit target in 2013, a 5.5% objective in 2014, 4.1% in 2015 and 2.7% in 2016, being below the 3% deficit required by the European Union.
A 1.2% deficit target \u201Cis not enough\u201D for the Catalan Government
The President of the Catalan Government, Artur Mas, welcomed the revision of the deficit targets for the Autonomous Communities but he considered it \u201Cnot to be enough to lift up the country\u201D. Mas, who leads the Centre-Right Catalan Nationalist Coalition (CiU), emphasised that both Spain and the European Union should be interested in Catalonia\u2019s recovery. According to him, if Catalonia fails, \u201CCatalonia will suffer but the whole of Spain and the entire South of Europe will also suffer\u201D because \u201Cif there is an economy that may be able to recover [in the South of Europe] it is ours\u201D. Furthermore, Mas added that the Catalan claims are not asking for money from somebody else: \u201Cthey are resources that we are not asking from someone, but that we generate from our productive work\u201D.
The Catalan Finance Minister asks for a 2.1% deficit target
Furthermore, the Catalan Finance Minister, Andreu Mas-Colell, has been insisting over the last few weeks that the Autonomous Communities should have at least a third of the total deficit. Mas-Colell was \u201Cvery disappointed\u201D with the announcement since, with a total target of 6.3%, he was expecting a target of at least 2.1% for Catalonia. Mas-Colell has denounced the \u201Casymmetrical reduction\u201D in the process of fiscal consolidation, in favour of the Spanish Government. While the Spanish Government has to decrease from a deficit of 5.1% in 2013 to 2.5% in 2016, the Catalan Government will have to decrease from a deficit of 1.2% in 2013 to only 0.2% in 2016, which is more than ten times inferior the deficit allowed to the Spanish Executive, underlined Mas-Colell.
Left-wing opposition parties back the Catalan Government\u2019s claim
Left-wing opposition parties in Catalonia also criticised the Spanish Government for giving such a strict deficit to the government level that has to pay for healthcare, education and social services. The Left-Wing Catalan Independence Party (ERC), which has a parliamentary stability agreement with the CiU, stated that they rather postpone the 2012 budget for 2013, than approve a new budget for 2013 with a 1.2% deficit objective. \u201CWe will not be accomplices to such nonsense\u201D, announced. The Catalan Socialist Party (PSC) said that the new deficit target for Catalonia is \u201Cinsufficient\u201D. In addition they added that the economic situation is the \u201Cconfirmation of the failure\u201D of the People\u2019s Party\u2019s (PP) economic policies (the PP runs the Spanish Government). The Catalan Green Socialist Party (ICV) said that the new deficit target is \u201Cabsolutely unfair\u201D. The ICV warned the Spanish Government that with such a harsh deficit for the Autonomous Communities they will be \u201Cpunishing healthcare, education and social services\u201D.
An additional \u20AC1 billion budget cut
On top of this, the Spanish Finance Minister, Cristóbal Montoro, also announced that the Spanish Government will stop providing funds for services that in theory are exclusively provided by the Autonomous Communities. The Spanish Government was providing such money through specific consortiums, for instance in some hospitals, and it represents \u20AC1 billion for the whole of Spain. Therefore the Autonomous Communities will be obliged to cope with this additional \u20AC1 billion reduction in funds as well. According to Montoro, doing this now is the right time to do it because the deficit targets for the Autonomous Communities have been lifted and the powers between each government level are being clarified.
In 2012, the Spanish Government was responsible for 82% of Spain\u2019s total deficit
The reasons for the revision of the deficit targets are the negative economic forecasts, which foresee a 1.3% drop in Spain\u2019s GDP in 2013. In addition, Spain ended 2012 with a 10.6% deficit due to the banking sector bailout, missing the 6.3% deficit target imposed by the European Union. The Autonomous Communities ended 2012 with a 1.73% deficit, thus being responsible for only 16.3% of Spain\u2019s total deficit, and local governments ended the year with a 0.2% deficit, 1.9% of the country\u2019s total deficit. Therefore, the Spanish Government was responsible for the remaining 81.8% of the total deficit, while it is responsible for only 50% of Spain\u2019s public spending.
Catalonia contributes with 8.5% of its GDP each year to pay for services and infrastructure in the rest of Spain
According to official data from between 1986 and 2009 released by the Catalan Government, 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. In 2005, this amount represented a fiscal redistribution effort ranging from \u20AC10.86 billion to \u20AC14.81 billion respectively. Nowadays, it could represent a redistribution of almost \u20AC17 billion. This imposed solidarity effort is judged to be excessive by a large part of Catalan society, which would like the fiscal deficit to be reduced and limited, especially when essential infrastructures are not being built and public services are being under-budgeted in Catalonia.