autonomous communities

One of the six ‘fathers’ of the Spanish Constitution, Miquel Roca, who currently leads one of the largest law firms in Spain, stated that the Constitution does not ban a referendum on Catalonia’s self-determination. “It is a matter of political will”, since Catalonia is recognised “as a nationality” by Spain’s main law, stated the respected lawyer, who also used to be a leader of the Centre-Right Catalan Nationalist Coalition (CiU). In front of a committee of the Catalan Parliament, Roca remarked that it would be “absurd” to call for a referendum at Spanish level, as it would only be binding in Catalonia. In the rest of Spain it would not be binding, emphasised Roca, as “it is said in Article 92”. This article reads that non-binding referendums can be called regarding issues of extreme importance.

Catalonia and the Autonomous Communities run by the Socialist Party (PSOE) were asking to make the Spanish Government’s deficit targets stricter and to proportionally relax those of the Autonomies. The Spanish Prime Minister Rajoy and the Autonomies run by the PP have opposed this redistribution, which would have transferred part of the flexibility allowed by Brussels to the Autonomies. In fact, when Brussels relaxed Spain’s deficit targets for 2012 and 2013, the Spanish Government did not share this flexibility with the Autonomies, which are responsible for almost 40% of the public spending and the managing of the Welfare State services. On the contrary, it made the Autonomies’ deficit targets stricter for 2013.

The Catalan Socialist Party (PSC) is against independence but supports claims for greater self-government and fiscal autonomy for Catalonia. The PSC’s Secretary General, Pere Navarro, proposes a “preferential bilateral relationship” between Catalonia and the Spanish Government, within an “asymmetrical” federal Spain. However, the Spanish Socialist Party (PSOE), which is formed by federated territorial parties such as the PSC, seems to evade the question, at least for the time being. The PSOE’s Secretary General visited Catalonia for the first time after the 1.5 million strong demonstration for independence and did not mention the word “federalism” a single time.

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.

Catalan Parliament approved on Wednesday the proposal for a new fiscal pact for Catalonia by an overall majority. The proposal defends the creation of an independent tax agency with powers to raise and manage all taxes in Catalonia. According to the Catalan President, Artur Mas, it involves starting a “difficult” negotiation with the government of Spain but it was either “now or never”. If achieved, this new fiscal arrangement would be similar to the one enjoyed by the Basque Country, that collects its own taxes and has been able to keep its debt under control. Therefore, it could help Catalonia getting out of the crisis. Currently, out of the all the territories, Catalonia is ranked third for the amount it pays in taxes, but is ranked tenth for the amount it receives in return. The new arrangement would see Catalonia leaving the common system established by the Organic Law on the Financing of the Autonomous Communities (LOFCA) and establishing bilateral fiscal relationships with Spain.

The Catalan President in a parliamentary session criticised what he considers to be “acts of disloyalty” by the Spanish government. He said it is unfair that regions have to assume most of the burden of Mariano Rajoy’s adjustment program and emphasised the fact that Madrid has yet to pay much of its debts to Catalonia. Mas accused Rajoy of “lacking respect” for the autonomous regions and said this could lead to a “break down of relations” between administrations.

The Spanish vice president, Soraya Sáenz de Santamaría, said the fund is an “extraordinary mechanism” that will force regions that use it to comply with “extraordinary conditions”. The money will come from a €6,000 million loan from the state lottery and the Spanish treasury. The autonomous communities that decide to use the money from the fund will have the responsibility of paying it back and will be subject to a potential intervention by the central government if they do not comply.

The Catalan Government’s debt represents 21% of Catalonia’s GDP, and it is in charge of almost half of public spending and manages healthcare, education and other basic services. Catalonia’s debt continues to increase because of the public deficit, but slows down its growth significantly. Over the first quarter of 2012, the Catalan Government’s debt increased by €222 million, while it had grown by €2.34 billion over the same period in 2011. With this last increase, the Catalan Government’s debt reached €42 billion at the end of March 2012.

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 Catalan Government and many town halls throughout Catalonia have applied for credit funds facilitated by the Spanish Government to clear out all their arrears from 2011. The Spanish Government, together with several banks, have put €35 billion on the table for long-term credits for the Autonomies and municipalities to get rid of all their arrears with suppliers. The credit is to be returned in 10 years time, and they have to make no payments in the first two years. The Catalan Government presented 268,489 bills totalling €1.98 billion, corresponding to all its services as well as public companies and agencies. They represent 11.48% from the total €17.26 billion applied by the Autonomies.

Aguirre, President of Madrid's regional government, asked to return healthcare, justice administration and education powers, which are managed by the Autonomous Communities, back to the Central Government. Prime Minister Rajoy, the leader of the People’s Party (PP) –Aguirre’s party–, stated that a debate about the Autonomous Community model is “out of the question”. Furthermore the PP’s Catalan leader defended the current model, as Catalonia “exerts its self-government as established in the Constitution”. Besides, the Catalan President told Aguirre to return the powers she does not want to manage, but to leave Catalonia aside. He added that the current model was designed “to dilute Catalonia and the Basque Country’s self-governance claims”.

The Spanish Minister for the Economy, Luís de Guindos, announced in Barcelona the future creation of the so-called ‘hispanobonds’, common bonds issued by the Autonomous Communities and backed by the Spanish Treasury. The objective is to reduce high interests rates, and thus the financial costs that the Autonomous Communities have to pay when they turn towards financial markets to get liquidity. The Catalan Finance Minister proposed the original idea several few weeks ago.

The Organisation for Economic Cooperation and Development’s Senior Economist for Spain thinks that the Catalan Government’s budget cuts are going “in the right direction”. He also denied that the Autonomous Communities’ deficit puts Spain solvency’s at risk.

The Autonomous Community public debt has increased 26% in the last 12 months and represents now the historic maximum of 11.4% of Spain’s GDP. Spain’s total public debt reached 63.6% of its GDP and totals 679.8 billion euros. The Catalan Government’s debt has reached 34.3 billion euros, 17.2% of Catalonia’s GDP. It raised 33% in the last 12 months, as the Catalan Government’s public deficit was 3.86% in 2010.

The European Commission also recognised "a different effort" to the rest of Spain’s Autonomous Communities. Brussels said so when on Tuesday it asked Spain “to strictly control” the public “deficit and debt of regional governments”, the day after Moody’s rating agency warned about Catalonia’s expected deficit for 2011. The Spanish Government took note from this particular recommendation but not the other made by Brussels, which included increasing energy taxes and VAT. The Catalan Government criticised Moody’s for “creating alarm” with assessments that do not take into account the whole situation. In addition, it denounced how the Spanish Government has reduced its own deficit by transferring it to the Autonomous Communities.