The Spanish Government threatens to financially asphyxiate the Autonomies that do not meet the deficit objective

The Spanish Finance Minister, Cristóbal Montoro, announced that the Central Government might heavily fine the governments of Autonomous Communities that do not meet the deficit objective. Montoro, from the People’s Party (PP), met with the regional governments run by his party to prepare a common position on the issue. On the same day, the Centre-Right Catalan Nationalist Coalition (CiU) gave its support to the Spanish’s Government decree to cut public spending and increase taxes, announced at the end of December.


January 11, 2012 10:12 PM

Madrid (ACN).- Cristóbal Montoro, the new Spanish Finance Minister, in charge of the budget, fiscal policy and public administration, has put further pressure on the Autonomous Communities and has blamed them for the budget deficit. The Minister threatened to financially asphyxiate those regions that do not meet the deficit objective. They might not receive all the transfers of funds that they are legally entitled to. Montoro, from the conservative Spanish nationalist People’s Party (PP), met the Autonomous Community governments controlled by his party in Madrid on Wednesday. The objective was to find a common stance on the issue before next Tuesday’s discussion on the Budget Stability Law at the meeting of the Fiscal and Financial Policy Council (CPFF), which brings together the Spanish Government and the 15 Autonomous Communities that do not raise their own taxes (the exceptions are the Basque Country and Navarra). It is expected that the sanctions for those not meeting the deficit objective will be discussed. This would be added to the proposal announced a week ago by the Spanish Minister for Economics, Luis De Guindos, for the approval of the Autonomies’ budget in advance. The Centre-Right Catalan Nationalist Coalition ‘Convergència i Unió’ (CiU), which controls the Catalan Government, stated yesterday that by no means would they accept political control of the budget, but that a technical overview could be discussed. On Wednesday CiU gave its backing to the Spanish Government’s budget cuts and tax increases at the Spanish Parliament’s vote.

The Spanish Parliament has passed the budget cut decree announced by the new Spanish Government at the end of December. The decree foresees a considerable increase in taxation, in particular income tax (between 0.7% and 7%) and the Land Value Tax. The measure has been approved with the votes of the People’s Party, which controls the Spanish Government, and the votes of the Centre-Right Catalan Nationalist Coalition, which runs the Catalan Government. CiU decided to vote for the measure for “political coherence” in front of “the extreme seriousness of the Spanish economy’s situation”, despite not sharing all of the means included, such as the tax increase. With the tax increase, the Spanish Government foresees earning €6.2 billion, which will be added to the €8.9 billion in budget cuts. In addition, Spanish Government civil servants will increase their working hours, jumping from a 35-hour week to 37.5 hours. Furthermore, no public employees will be hired, with the exception of those working in essential services.