austerity

The German Chancellor is “impressed” with Spain’s reforms. According to Angela Merkel, the reforms are headed “in the right direction”, they need to be pursued “at all government levels” and they will need “time to show their results”, “as it happened in Germany ten years ago” with their structural reforms. Angela Merkel met with the Spanish Prime Minister Mariano Rajoy in Madrid, the day the European Central Bank announced it was buying sovereign bonds. Merkel stated that reforms have to continue “at all government levels”. The Chancellor also defended the European Union as a project guaranteeing peace and prosperity, and the Euro as “our common currency”.

The Spokesperson for the Catalan Government emphasised the money requested comes from Catalan taxpayers, since Catalonia pays €17 billion each year for services and investments in the rest of Spain. Nonetheless, the Catalan Executive stated it will meet the deficit targets and will follow the already approved austerity plan. The Spanish PM and leader of the People’s Party (PP) confirms it will “help Catalonia as we help the other Autonomous Communities”. However, the PP Spokesperson in Catalonia said the Catalan Government will have to accept whatever the conditions are. The Catalan Socialists want to know what the €5 billion will be spent on before supporting the decision. The Catalan Independence parties criticised the decision for having given away Catalonia’s autonomy.

The Spanish Prime Minister, Mariano Rajoy, has announced further budget cuts for 2013 and 2014, totalling an additional €89.1 billion. These budget cuts are to be added to those implemented between 2010 and 2012. Autonomous Communities will have to cut their budget by an additional €19 billion in 2013 and 2014, which is added to the €15 billion already announced in Spring affecting education and healthcare. However, no details of the €19 billion plan were provided. Rajoy stated that in 2014 the Spanish economy will grow by 1.2%, leaving the recession behind. With this plan, Spain’s public deficit for 2013 will be set at 4.5% and at 2.8% for 2014.

The Spanish Congress has ratified a new austerity package this Thursday with 180 votes from People’s Party (PP), 131 votes against made up by the other parties and one abstention from the Unión del Pueblo Navarro (UPN). The new measures include the suspension of the Christmas bonus for public sector officials, an increase in VAT, and a reduction in unemployment benefit after the sixth month. The Spanish finance minister, Cristóbal Montoro, defended the measures on the grounds that they are "necessary sacrifices" to enable economic recovery and that "giving up is not recommended or possible". Various groups have protested against the measures, with over 80 demonstrations across the country.

President Artur Mas says Catalonia needs to come out of the crisis stronger and citizens should “come together” in the wake of new austerity measures announced this Wednesday by Spanish president Mariano Rajoy. The Catalan government spokesman, Francesc Homs, celebrated Rajoy’s decision to cut Spanish public workers salaries, several months after the same decision was implemented in Catalonia. However, he criticised the VAT rise. The Catalan minister for the Economy, Andreu Mas-Colell, said Madrid’s plan is “in line” with EU instructions but urged Rajoy to offer “some kind of compensation” to the autonomous communities because their expenditure won’t benefit from the VAT rise.

The ruling Centre-Right Catalan Nationalist Coalition, Convergència i Unió (CiU) and the People’s Party (PP) have agreed to evaluate the drug prescription fee in 2013. The implementation in 2013 of the 1 euro fee will be on the condition of meeting the deficit targets and the effects of other financial measures regarding medicines. The PP has abstained in the Catalan Parliament’s vote and the plan finally has the green light to be implemented.

Catalan citizens will have to pay €1 for every medical prescription, with a maximum of €61 per year. 127,000 people will not have to pay the tax for social reasons. This measure approved by the Catalan Government aims to reduce healthcare spending by moderating the purchase of medicines, the final goal being reducing the public deficit.

The Catalan Government will adjust its budget by €4.295 billion in 2012, through spend cuts of €2.680 billion and increasing revenue by €1.615 billion. With this plan, the Catalan Government will meet the 1.5% deficit target. The Council of Fiscal and Financial Policy (CPFF), which brings together the Spanish Government and the 17 Autonomies, has approved Catalonia’s budget adjustment plan for 2012-2014. The Spanish Government would pay part of the money owed, but not all of it. The Catalan Government has included a plan B in case the Spanish Government does not honour its fiscal obligations towards Catalonia.

The third plan represents an additional budget cut of €1.5 billion, in order to meet the 1.5% deficit target for this year. The President of the Catalan Government, Artur Mas, said that the plan “guarantees essential services”. He also stated that if the Spanish Government had paid what it owed last year, the current reduction would be halved. The plan decreases budget allocations for public companies, reduces public employee salaries once again, decreases the amount allocated for subsidies, delays investments, privatises some public companies, sells public buildings, and implements the measures decided by the Spanish Government regarding health and education. The opposition criticised the plan for not being concrete and effective enough.

The Catalan Parliament has approved Catalonia’s Law of Budget Stability, which is more restrictive than its Spanish equivalent. The Catalan law reduces the adaptation time set in Spanish law by 2 years. Furthermore, it sets a 0% deficit for 2020. The law has been approved with the votes of the Centre-Right Catalan Nationalist Coalition (CiU), which runs the Catalan Government, and the Conservative People’s Party (PP), which runs the Spanish Executive. Left-Wing parties have voted against the measure; according to them it follows the “0% deficit dogma” and forgets about “necessary” social spending.

The Catalan Government has announced a plan against the Spanish Government’s “recentralisation offensive”. One of its actions is taking the education and healthcare reforms adopted by Madrid to the Catalan Council for Constitutional Guarantees, as a first step to bring them to Spain’s Constitutional Court. The Catalan Government believes that some of the measures invade its jurisdiction, as it directly manages education and healthcare. Another measure is issuing a report pointing out the Spanish Government’s duplicities, such as maintaining ministries such as education, healthcare and culture. These policies are managed by the Autonomies. Left-Wing opposition parties have urged the Catalan Government to take further measures, while the PP has accused the Catalan Executive of “lying”.

Coinciding with the European Central Bank Governing Council organised in Barcelona, the President of the Catalan Government, Artur Mas, met with Mario Draghi and other members of the ECB Governing Council. Mas took the opportunity to explain to the ECB the Catalan Government’s austerity measures and its efforts to reduce Catalonia’s public deficit. He also spoke of his party’s support to all the reforms taken at Spanish level, despite being unpopular. However, Mas warned the ECB President that reducing the deficit too fast in the middle of an economic recession might worsen the crisis.

The Dutch newspaper NRC Handelsblad has published an interview with the President of the Catalan Government, Artur Mas. Mas states that “Catalonia’s intervention by Spain would be unthinkable” and “unfair, as no government has done as much as Catalonia's to adjust the economic situation”. Furthermore, he adds that “people’s reaction [against such an intervention] would be very strong”. NRC explains the austerity measures implemented by the Catalan Government to reduce its deficit, such as the drug prescription fee or public employee salary reduction. Furthermore, Mas complained that Spain’s Autonomies model has “decentralised spending but not revenue”; “we want to collect our taxes”, he affirmed, being another “state within a federal Europe”, contributing to regional solidarity.

The day after the Spanish Government imposed increasing the price citizens pay for medication, the Spokesperson for the Catalan Government confirmed that Catalonia will maintain the €1 drug prescription fee. The Catalan Health Minister had said earlier they would study if the drug prescription fee would be implemented. The main doctors union and Left-Wing opposition parties asked the Catalan Government to eliminate the drug prescription fee, because it would make Catalan citizens pay more for their medication than the rest of Spanish citizens.

The Spanish Minister of Health met with her counterparts from the Autonomous Communities to discuss measures to reduce healthcare spending by €7 billion. Pensioners will have to pay for 10% of their medication, with a maximum of between €8 and €18 per month depending on their income. Furthermore, people with a job will have to pay for 40% to 60% of the price, depending on their income. Besides, the number of pills will better adapt to prescriptions, drug purchases will be centralised and generic drug prescriptions will be fostered. Catalonia might not eliminate the drug prescription fee although the final decision will be taken once the impact of measures is fully studied. The Catalan Minister also emphasised that the main problem in Catalonia is “the system’s funding” and not expenditure, which cannot be further reduced.