The Spanish Government will set a spending limit and sanctions for Autonomies that do not meet the deficit objectives

Catalonia already approved its own spending limit through a law of its own last September. The Spanish Vice President, Soraya Sáenz de Santamaría, explained that the new Budget Stability and Sustainability Law will introduce “mechanism corrections” and “almost automatic” sanctions for public administrations that do not meet the deficit objectives. In addition, before approving their budget, the Autonomies and large city town councils will have to commit to a spending limit and present detailed reports on several aspects of the budget. However, she stressed that each autonomous government will have the freedom to allocate resources.

CNA / Gaspar Pericay Coll

January 13, 2012 11:26 PM

Madrid (ACN).- The Vice President of the Spanish Government, Soraya Sáenz de Santamaría, explained on Friday after the weekly Cabinet meeting some aspects of the new Budget Stability and Sustainability Law. The main changes to public administrations (Central Government, regional government and local councils and municipalities) are that failure to meet the deficit objectives will receive “almost automatic” sanctions. Furthermore, “mechanism corrections” will be in place to address the situation and meet the deficit objective, as it is “the responsibility of everybody” and “a commitment of all in front of the European Union”. Particular attention will be paid to the “seriousness and recidivism” of the failure. Besides, as discussed in the past few days, the Spanish Government will oblige the Autonomous Community governments and large city town councils to present reports on several budget aspects and set a spending limit before approving their own budget. However, the Vice President stressed that the Spanish Government will not go into spending priorities and resource allocation, as was feared in Catalonia and several voices had warned over the past few days. Each autonomous government will have the freedom to allocate their resources whatever way it considers correct, following the autonomy principle recognised in the Spanish Constitution, affirmed Sáenz de Santamaría. The Spanish Government “will not say how to spend the money, but set a spending limit”, she explained. In fact, the respect paid to the autonomy principle is an obligation recognised in the Spanish Constitution. Nonetheless, the Catalan Government already approved its own Budget Stability Law at the end of September, which fixes a gradual reduction of the public deficit in the coming years in order to reach a self-imposed maximum of 0.14% deficit in 2018. Catalonia has thus been a pioneer in this matter and the rest of the Autonomies do not have their own law yet.

Spain’s Budget Stability will have to ensure budget austerity in Spain and throughout all public administrations and at all government levels. The new law will be based on the principles of “equality, responsibility and loyalty” among the different government levels, said Sáenz de Santamaría. The legal text will develop Spain’s Constitutional amendment approved last September that introduced a public deficit limit. The law would foresee that by 2020, the Autonomous Community governments cannot have a deficit higher than 0.14%. In this sense, Catalonia’s law obliges the Catalan Government not to have a deficit higher than 0.14% in 2018. The Spanish Government would be allowed to reach a 0.4% deficit in the same year.

The Catalan Government already approved a deficit limit of 0.14% by 2018

Following the decision to introduce an amendment to the Spanish Constitution, the Catalan Government approved its own law limiting its deficit. At the end of September, just days after the Constitutional amendment had been approved, the Catalan Government decided that by 2018, its deficit will be limited to .014% of Catalonia’s GDP. With this law, the Catalan Government will be obliged to respect a deficit ceiling each year, which will be gradually reduced year on year. In 2012, the deficit ceiling will represent 1.3%; in 2013, 1.1%; and in 2014, 1%. From this year forward, the Government will have four more years to reach the 0.14% limit in 2018, explained the Catalan Finance Minister, Andreu Mas-Colell, in September.

A law to be discussed with all the Autonomous Communities

Sáenz de Santamaría explained that Cristóbal Montoro, Minister for Finance and Public Administration, presented in Friday’s Cabinet meeting a report to draft Spain’s Budget Stability and Sustainability Law. The Spanish Government’s proposal will be discussed in next week’s meeting between the Spanish Government and all the Autonomous Communities with the exception of the Basque Country and Navarra, which have their own fiscal model and raise their own taxes. It is expected the Autonomies run by the People’s Party, which also runs the Spanish Government, will take a common approach, and might impose their views on the rest of the regions, including Catalonia. However, the Spanish Vice President said, “We need to work together to solve these liquidity problems”. She said that the Spanish Government aims “to reach an agreement” and “to listen to the Autonomies’ needs”, in particular related to “the expiration calendar of their loans”.

The Spanish Government will pay “particular attention” to the Catalan Government’s claims

Soraya Sáenz de Santamaría stated that the Spanish Government will pay “particular attention” to the Catalan Government’s claims, and those of the party running Catalonia, the Centre-Right Catalan Nationalist Coalition ‘Convergència i Unió’ (CiU), “because Catalonia is a very important community in terms of GDP, population and wealth”. Two days ago, CiU voted with the People’s Party in favour of the Spanish Government’s decree cutting public spending and increasing taxes. The Spanish Vice President wished that CiU’s “yes” marks the beginning of “a wanted institutional cooperation”. “ We want to have flowing dialogue with other parties, including CiU”, she stated. Since “important reforms are to be discussed” in the coming weeks and months, which “have an effect on everybody”, Sáenz de Santamaría said she will listen to the views of the Catalan Government’s and CiU.