austerity measures

In 2015 the employees of the Catalan Government and related institutions and public companies will receive their full salary once again after having suffered a 7.5% reduction over the last 3 years. The Spokesperson for the Catalan Government and Minister for the Presidency, Francesc Homs, announced the measure on Tuesday, after the weekly Cabinet meeting. Furthermore, the Executive will also stop the 15% reduction of working hours and salary of temporary workers in the public sector. Those austerity measures were approved in the 2012 budget as a drastic way to cut public spending in order to reduce the public deficit. The Spanish Government has been unilaterally imposing strict deficit targets on the Catalan Executive while it maintained an unfair inter-territorial fiscal scheme with Catalonia and reduced its resources. In fact, the Spanish Government and most of the other Autonomous Communities did not reduce public salaries in the worst years of economic crisis, while the Catalan Government was the first one to launch the ambitious austerity plan.

On Tuesday, the Spanish Finance Minister, Cristóbal Montoro, rejected to review the funding scheme of the Autonomous Communities to grant them more resources, despite the fact that the Catalan Government is under-budgeted. On Wednesday, the Spanish Finance Ministry downplayed Catalonia's fiscal deficit by issuing the so-called fiscal balances, which calculate the inter-territorial fiscal transfers, posting a significantly low Catalan contribution. According to the Spanish Government's new calculations, Catalonia gave away €8.46 billion in 2011, representing 4.35% of its GDP. The figure is significantly lower than the Catalan Government's calculations: €15.01 billion and €11.09 billion, using two complementary methodologies used by the Spanish Executive in 2008 and agreed among independent university experts.

The Catalan Government issued on Thursday its own calculation of the so-called fiscal balances with the latest data available, which is from 2011. In that year, Catalans funded services and infrastructure in the rest of Spain for €15 billion, equivalent to 7.7% of Catalonia's GDP or €2,055 per citizen, using the monetary flow formula. Using the tax-benefit method, Catalonia contributed €11.1 billion, equivalent to 5.7% of its GDP. The two methods are "complementary", as the Catalan Finance Minister, Andreu Mas-Colell stated, although the first one makes less assumptions and is closer to reality in times of economic crisis and high unemployment. "Catalonia is a net and generous contributor" to the whole of Spain, he said. In fact, the figures for 2011 confirm Catalonia's "sustained" negative "fiscal balance" for the 1986-2011 period, with an average 8.0% fiscal deficit. This has been for decades a very sensitive issue in Catalan and Spanish politics, and even more considering the self-determination debate.

The 2014 European parliamentary elections are likely to become a milestone for Catalan people for three main reasons, which taken together send a strong message to the international community, the EU institutions and Member State governments, including that of Spain. Firstly, political parties and civil society organisations supporting self-determination have called citizens to vote in these elections as a way to push for a referendum on independence to take place on the 9^th of November of this year. This may significantly increase turnout from the low 36.94% registered in 2009. Secondly, the two main self-determination parties are likely to be the most voted parties in Catalonia. In addition, the Left-Wing Independence Party (ERC) may go from 4^th place in the 2009 poll to 1^st place this time around. Thirdly, support for the two main parties behind the EU austerity measures that turned into drastic budget cuts in southern Europe – the People’s Party and the Socialist Party – is likely to plummet in Catalonia.

Following an appeal from the Spanish Government, the Constitutional Court has confirmed the cautionary halt adopted in January 2013 and it has now definitively banned the Catalan Executive's drug prescription fee. The measure had been adopted to reduce pharmaceutical spending by limiting superfluous drug demand in order to reduce the overall public spending. It was one of the austerity measures adopted by the Catalan Government in 2012 to reduce public deficit, in order to meet the strict deficit targets imposed by the Spanish Executive. The measure meant that Catalans had to pay a one-euro fee for each drug prescription, with a maximum of 60 euros per year and with many exceptions for people with chronic diseases, on low incomes and pensioners. On the same day, the Constitutional Court has backed the Catalan Executive's judicial fees, also appealed by Madrid.

The Government of Extremadura, a region bordering Portugal, presented a study comparing its contributions to the rest of Spain with those of the other Autonomous Communities, particularly focusing on Catalonia. The main thrust of the report was that Catalonia receives the highest amount of money from the Spanish Government, which goes against absolutely all the previous studies that have established that Catalan taxes fund services, investments and infrastructure in the rest of Spain. The Catalan Finance Minister, Andreu Mas-Colell, characterised “the political document” presented by Extremadura’s Government as a “complete nonsense”. Mas-Colell, who was Professor of Economics at Berkley and Harvard from 1972 to 1995, said that the report lacked rigour and was not a technical work. The next day Extremadura’s President, José Antonio Monago, stated that Catalonia is “a privileged territory” and questioned whether it could repay its debt.

The Catalan business community is deeply annoyed with the Spanish Government for not publishing transparent data on Catalonia’s fiscal contribution to the rest of Spain and therefore not recognising the fiscal deficit. The Spanish Finance Minister, Cristóbal Montoro, was supposed to issue the so-called fiscal balances last December but their publication was inexplicably delayed. Last Friday, in late January, Montoro announced the fiscal balances would no longer be calculated and published in the present form; instead, he would publish in March the “regionalised public figures” stating the costs of public services per citizen because the fiscal balances were “incomplete and incoherent”. However, on Tuesday, the Minister recognised that they were “correct” but “wrongly used” to support Catalan independence claims.

All the opposition parties except the Left-Wing Catalan Independence Party (ERC), which shares a parliamentary stability agreement with the governing Centre-Right Catalan Nationalist Coalition (CiU), have criticised the Catalan Government’s budget for 2014 – which amounts to €29.31 billion – for being “anti-social”. The Catalan Socialist Party (PSC), the People’s Party (PP) – which runs the Spanish Government, the Catalan Green Socialist and Communist Coalition (ICV-EUiA), the anti-Catalan nationalism party Ciutadans (C’s) and the radical left-wing and independence party CUP all opposed the budget proposal. The CiU and ERC defended the bill and have accused the other parties of “not presenting real alternatives”. The budget’s approval was delayed by a month after the PP appealed against the bill because it includes €5 million for a consultation vote.

The Director of Barcelona’s Centre for Regenerative Medicine (CMRB), world-famous scientist Juan Carlos Izpisúa, resigned due to the lack of financial and political support from both Spanish and Catalan Governments. Such news was first published by Spanish newspaper ‘El País’ and then confirmed by sources in the research centre. Internationally, Izpisúa is considered to be one of the most esteemed and learned scientists in the field of stem cells. With the Director stepping down, the CMRB could well lose most of its current projects. Indeed, 18 of the 21 projects are the intellectual property of Izpisúa and might no longer be carried out in the Barcelona-based research centre if Izpisúa quit.

Next to the Spanish Prime Minister Mariano Rajoy (who went to the White House), the President of the United States, Barack Obama, did not talk about Catalonia despite being asked about it directly by a journalist. Obama did not repeat the formula expressed by other international leaders – it is Spain’s internal matter – but instead preferred to avoid the issue. He did not explicitly back the Spanish PM, despite the fact that Rajoy had stated, only a few minutes earlier, that “Catalonia’s independence will not happen”. Rajoy’s meeting with Obama and the following press conference at the White House were also controversial because the Spanish Government banned several media that were covering the trip and only allowed one Catalan newspaper to attend it.

The Catalan Government put 4 buildings up for auction this Friday, following a plan to rationalise the spaces it uses, reduce spending and increase revenue in order to reduce public deficit. The headquarters of the Catalan Finance Ministry, located in a 8,000 square metre Art-Nouveau building in Barcelona’s Rambla Catalunya, has been bought by an Italian pharmaceutical company through FINAF 92 for €23.2 million. The other building, with a surface of 7,200 square metres, was used by the Catalan Police and is located in front of Barcelona’s Ciutadella Park. It has been bought by the German hotel company MO Düsseldorf Immermannstrasse GmbH & CO. KG for €14.1 million. On Thursday, the Catalan Government announced a plan to reduce its office space by 45% in the coming year by concentrating services. The plan includes selling the most attractive buildings.

The Catalan Finance Minister presented on Thursday a ‘Space Rationalisation and Optimisation Plan’ that foresees to partially leave Barcelona’s city centre and set up offices in cheaper areas. Nonetheless, the measure does not include citizen information and care centres such as schools and community health centres. Furthermore, the initiative also plans to reduce the global office space by using previously-empty floors and concentrating services without laying off staff. The objective is to pass from holding 377,000 square metres to fully occupying 207,000 square metres, a 45% reduction. By doing so, the Catalan Government expects to reduce rents by a 20% average, to cut off indirect costs by 50% and to decrease energy spending by 30%. Furthermore, it will sell the most appealing buildings.

The Catalan Executive considers the Spanish Government’s decision not to pay them the money corresponding to the revenue from the tax on bank deposits in 2013 “very bad news”. On the 18^th December 2012, the Catalan Executive approved a tax on banks’ global deposits (not on personal deposits) with a general rate of 0.5% but with many reductions. Such a tax already existed in Andalusia, Extremadura and the Canaries. Nine days later, the Spanish Government approved its own tax, but at a 0% rate, therefore not collecting any money but cancelling de facto the Autonomous Communities’ tax. When this happens, the Spanish Executive is legally obliged to compensate the regional government, transferring the equivalent money. Madrid did so with the others, but not with Catalonia. Such a tax would have generated €800 million in revenue in 2013.

Thousands of people – 12,000 according to Barcelona’s local police and 200,000 according to the organisers – demonstrated on Sunday in the streets of Barcelona to protest against the Spanish and Catalan Governments’ austerity measures and “antisocial” budgets. Led by the platform ‘Prou Retallades’ (“Stop Budget Cuts”) , the UGT and CCOO trade-unions, as well as political parties and associations, citizens voiced their disapproval of the new pension reform, working fragility and the latest austerity measures. They also specifically protested against the Catalan and Spanish Governments’ budgets for 2014, which they consider “antisocial”. The demonstration organisers criticised the “blind obedience” of the Catalan and Spanish Executives to the European Commission and the Troika.

In the last few days, there has been an attempt to build bridges between Catalonia and Spain, despite the visible increase of tension between the two governments. In public the Catalan and Spanish Executives are heading for a collision but at the same time discreet manoeuvres explore alternative ways out. This Tuesday, the ‘number 2’ of the Centre-Right Catalan Nationalist Coalition (CiU) – which runs the Catalan Government – Josep Antoni Duran I Lleida acknowledged that he met with the Spanish Prime Minister and leader of the People’s Party (PP) Mariano Rajoy on the 16^th October. Besides, the Catalan President, Artur Mas, met on Friday with the Secretary General of the Spanish Socialist Party (PSOE) to talk about a constitutional change. Today, the Spokesperson of the Catalan Government, Francesc Homs, stated that Catalonia is waiting for an offer from the Spanish establishment. Although “there is no deadline” for this offer, the self-determination process will not be waiting for it, although if it arrives it will be studied.