catalan budget

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.

Andreu Mas-Colell, Catalan Finance Minister, considered the People’s Party (PP) to be “obstructionist” for blocking the approval of the Catalan Government’s budget for 2014, which was initially scheduled for this week. On Tuesday evening the PP – which runs the Spanish Government – confirmed it was freezing the implementation of the €29.31 billion budget because it included €5 million (0.0176% of the total spending) to fund “electoral processes and citizen consultations”. Mas-Colell warned that by delaying the budget’s implementation, the Catalan Government will lose revenue coming from new taxes and therefore it will have more difficulties meeting the deficit targets for 2014. All the parties in the Catalan Parliament criticised the PP’s initiative except the anti-Catalan nationalism Ciutadans (C’s), which backed the action.

On Monday the People’s Party (PP) announced they were considering freezing the 2014 Catalan Government’s budget of €29.31 billion. The reason is that they include €5 million (0.017% of the total spending) to fund “electoral processes and citizen consultations”, which they fear could fund a self-determination vote. The Catalan Government has the power to organise a consultation process, as well as to modify small items once the budget is approved. The PP was waiting for the Spanish Finance Minister’s green light, since blocking the budget’s approval could have consequences on the objective to reduce public deficit and on meeting the targets imposed by the EU. Cristóbal Montoro argued that, since the blocking would “only last some 30 days”, there is no such danger.

The People’s Party (PP) – which runs the Spanish Government – has announced it is looking at the possibility of freezing the approval of the Catalan Executive’s own budget. They are considering blocking the €29.31 billion budget because it will allocate €5 million (0.017% of the total spending) to a “citizen consultation”. The approval of such a budget is essential to meet the 1% deficit target for 2014. However, the PP fears this money could be used to organise the self-determination vote in 2014. The PP’s leader in Catalonia, Alícia Sánchez-Camacho, has announced she was talking with the Spanish Finance Minister, Cristóbal Montoro, on blocking the budget’s approval. The CiU, running the Catalan Government, has stated it is “a mistake”.

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.

The Catalan Chemists’ Professional Association, in charge of distributing the money from partially-subsidised prescribed drugs, has already received €309 million of the €416 million arrears payments due.The Professional Association announced the “immediate distribution” of the money received. Two weeks ago, Catalan chemists went on strike for these arrears, urging the Catalan and Spanish Governments to issue the payments. In theory the Catalan Executive is in charge of paying them, but to do so it needs a previous transfer from the Spanish Government. The necessary transfers from Madrid have been arriving intermittently over the last year and on many occasions with considerable delay. For these reasons, chemists protested on the 7^th November in front of the Spanish Government’s Delegation in Barcelona.

The Spanish Finance Minister, Cristóbal Montoro, “regretted” on Tuesday evening the “confusion” about having announced in October he was cancelling a €1.76 billion transfer to the Catalan Government. Without this scheduled payment, the Catalan Executive is having serious problems to fund the 1.58% deficit approved for 2013. “These things can happen” said Montoro. In late October – 10 weeks before the end of the year – the Spanish Minister announced that the Catalan Government would not receive the €1.76 billion requested from the Liquidity Fund for the Autonomous Communities (FLA) since this money would be used by the Service Provider Fund to pay for arrear invoices. A week ago, the Catalan Government confirmed Montoro would transfer the €1.76 billion.

The Catalan Executive says it has the Spanish Government’s commitment to send the €1.76 billion that the Spanish Finance Minister, Cristóbal Montoro, announced in late October would not be transferred. This money corresponds to the loan to fund the Catalan Government’s deficit target increase from 0.7% to 1.58% in 2013 approved in July by the Spanish Executive. However, in late October – 10 weeks before the end of the year, Montoro said that this amount would be deducted from the fund to pay the Catalan Government’s service providers. This meant that Catalonia was missing €1.76 billion to fund public services and departments for the last part of the year. Negotiations during the last 4 weeks have modified Montoro’s October decision.

The Catalan Government has presented its budget proposal for 2014, which posts a 1% deficit, representing a 35.5% annual reduction and amounting to €1.98 billion, in line with the 2014 deficit targets imposed by the Spanish Government. The budget prioritises healthcare, education and social policies, which represent 71% of the total non-financial spending. Non-financial spending grows by 0.2% and reaches €20.30 billion, while the total spending amounts to €29.31 billion. The Catalan Finance Minister stressed that spending had not been reduced this year since in the last 3 years it had already dropped by 22%. Budget cuts “have reached their limit”, as otherwise “social cohesion” and “the Welfare State” would “be at risk” he said. In 2014 the Catalan Executive will spend the same per inhabitant as it was doing in 2004 taking into account inflation (€1,901).The adjustment for 2014 focuses on increasing revenue by €3.2 billion, mostly through new taxes (€910 million) and the sales of assets and privatisations (€2.32 billion). On top of this, the Catalan Government forecasts a 0.9% economic growth for 2014, leaving behind the recession of 2012 (-1.2%) and 2013 (-1.1%).

The Catalan Government has forecasted a 0.9% economic growth for 2014 in its budget proposal for next year, leaving behind the recession of 2012 (-1.2%) and 2013 (-1.1%). The positive figures are mostly due to the strength of the export sector – which will continue to improve its results. The main factor slowing down growth will be the internal demand, which will continue to decrease although it will do so at a lower pace. In addition, the Catalan Executive believes the unemployment rate will decrease and reach 23.1% by the end of the year. It is expected 2013 will end with a 23.7% unemployment rate, higher than the 22.6% rate registered at the end of 2012.

During the first two thirds of 2013, the Catalan Government deficit amounted to €2.05 billion, equivalent to 1.06% of Catalonia’s GDP. The figure corresponds to 67% of the 1.58% deficit target imposed by the Spanish Government to the Catalan Executive for the whole year 2013. Meanwhile, the entire Spanish public sector posted a deficit corresponding to 5.07% of Spain’s GDP in the same period, although data from municipalities is still pending to be included. The figure already represents 78% of the total 6.5% deficit target that the European Union allowed Spain for the entire year 2013.

The Spanish Government has sent a Budget Plan to the European Commission, following the new rules giving Brussels greater control on Member State finances. The plan’s scope includes all government levels in Spain. In the plan, the Spanish Government imposes a global budget adjustment of €8 billion on the Autonomous Community governments, including Catalonia’s, to be achieved within the next two years. €2.14 billion would come from increasing revenue next year, since Madrid considers that the Autonomous Communities can still increase their own taxes, particularly those linked to the environment. €1.93 billion would come from further budget cuts. This would total €4.07 billion in 2014, which would roughly be repeated in 2015.

The Catalan Government has published a report listing all the Spanish Executive’s disloyalties towards Catalonia including not respecting legislation, devolved powers and cultural aspects. The 50-page document has a chapter quantifying the costs of such disloyalty, which totals €9.375 billion, according to the Catalan Government. €5.748 billion correspond to infrastructure which has not been built; €672 million to a reduction in institutional transfers; €1.715 billion to spending increases due to the Spanish Government’s unilateral decisions; and €1.239 to revenue reductions due to similar unilateral decisions which have never been compensated. The report does not take into account the so-called fiscal deficit – the €16.5 billion that each year Catalan tax-payers transfer to the rest of Spain. The Catalan Government emphasised that there has been “a permanent disloyal activity” since 2000.

The Catalan Government will receive €1.7 billion less from the Spanish Liquidity Fund (FLA) in 2013 than had been previously foreseen. The news was announced by the Spanish Government in mid-October, with only 10 weeks left before the end of the year. Madrid has justified the decision by linking the FLA to the plan to lend money to public bodies in order to enable them to pay suppliers. The money to pay suppliers will now be deducted from the FLA, changing the previous conditions. As a consequence, the Catalan Government will not be able to fund the 1.58% deficit it had allowed, since the FLA is its only access to liquidity. Now, Catalonia will only have money for the previously-foreseen 0.7% deficit. The Catalan Executive feels “tricked” as “it is not understandable that the Spanish Government agrees to a greater deficit and later cannot fund this deficit”.

The President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU), Artur Mas, and the Left-Wing Catalan Independence Party (ERC) agreed on speeding up the process of building “state structures” and drafting the “most social budget” in Catalonia’s recent history. In addition, Mas criticised the ‘third way’ between independence from Spain and the current situation proposed by the Catalan Socialist Party (PSC) and CiU’s ‘number 2’, saying that Catalans “have been trying” this way “for the last 100 years” and “it has never worked”. Spanish nationalist People’s Party (PP) and Ciutadans (C’s) called on Mas to stop the self-determination process. However, the main Catalan parties, from left to right and representing 77% of the parliamentary seats, presented a common text supporting Catalonia’s right to self-determination through a legal vote.