deficit reduction

The Catalan Minister for Territory and Sustainability, Lluís Recoder, has emphasised that “not attending a meeting as a protest does not mean not honouring the agreements”. Recoder was answering the Spanish Finance Minister, Cristóbal Montoro, who emphasised that all the Autonomies are obliged to meet the deficit and debt targets. Recoder said that Montoro’s words were not appropriate and unfair, since Catalonia has been leading austerity reforms and budget cuts in Spain.

Andalusia quits the meeting after one hour. For the first time in democracy, the Catalan Finance Minister did not attend the Fiscal and Financial Policy Council (CPFF), where the Autonomous Community governments and the Spanish Executive discuss the regions’ financial situation and funding. Catalonia refused to attend the CPFF as decisions were taken beforehand by the People’s Party, which runs the Spanish Government and most of the Autonomies for which CPFF decisions are binding. In addition, the Catalan Finance Minister refused to attend the meeting due to Spanish Government’s unilateral decision to oblige the Autonomies to meet a stricter deficit target in 2013, passing from the planned 1.1% to 0.7%. He sent a letter asking for the same flexibility the European Union is giving to Spain.

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’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.

On Tuesday the Catalan Council for Constitutional Guarantees (CGE) declared that the Spanish Government decree cutting €3 billion in education does not respect 2 Constitution articles and 5 other articles from Catalonia’s Statute of Autonomy, being thus unconstitutional and going beyond Madrid’s jurisdiction. The Catalan Government following the CGE’s unconstitutionality assessment decided to bring the education decree to the Constitutional Court(TC), as it did last week with Rajoy’s health decree. However, after the Spanish Government threatened to bring approved initiatives from the Catalan Executive to the TC, the Catalan Government decided to modify the decrees through dialogue and bring the decrees to the TC as a last option.

The Spanish Finance Minister, Cristóbal Montoro, presented the budget data from January to March 2012. The Autonomous Community Governments together had a 0% deficit in this period. Among them, Catalonia’s had a 0.45% budget surplus, while in the same period of 2011 it had a 0.65% deficit. Montoro emphasised that the data shows “the big effort” the Autonomies are making.

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 rejected the Spanish Executive’s initiative to limit public healthcare to foreign nationals without a legalised residence status. The Spanish Government proposed that irregular immigrants would only have access to emergency rooms and obstetrics services, but not to regular treatments and consultations. The Catalan Health Minister, Boi Ruiz, confirmed on Friday that in Catalonia, all foreign residents, independent of their legal status, would have free access to the public health system for “solidarity” principles but also “for public health reasons”. Besides the ethical issue, experts had warned about infectious diseases that could have increased because of having groups of people excluded from the health system.

The Spanish Finance Minister, Cristóbal Montoro, blamed the Autonomies and town halls for Spain’s public deficit. Montoro stated that the Spanish Government is meeting the deficit objective for 2012 with the results from the first quarter. However, Catalan MPs reminded Montoro that he is refusing to pay the money it owes Catalan institutions and that with this strategy he transfers the blame for the deficit by not transferring the funds. The Catalan Government directly accused the Spanish Executive for their “massive lie”. According to internal studies from the Catalan Government, the Spanish Executive made incorrect calculations by saying the Autonomies could save €10 billion in healthcare and education with last week’s measures.

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.

The Spanish Minister for Education met with his counterparts from the Autonomous Communities and imposed 6 measures that must be adopted to save €3 billion. The Catalan Minister considers that three of the measures might invade powers managed by the Autonomies, and therefore the Spanish Government might be ruling beyond its jurisdiction. The Catalan Government will study them and does not rule out bringing the Spanish Government to the Constitutional Court. Nonetheless, the Spanish Minister reminded that, before a judge says the contrary, the measures are still obligatory. Besides, the Catalan Minister also emphasised the previous austerity efforts made by the Catalan Government also in Education, and the Spanish Ministry’s “lack of knowledge” about them.

CiU stated that it will be “absurd” that they support the current budget proposal in the Spanish Parliament although they are open to negotiate and modify it. Furthermore, CiU “does not rule out the possibility of taking the Spanish Government to court” for ignoring the current legislation. The Socialists directly considered the budget proposal “to mistreat Catalonia”. The Green Socialists ask for a “common Catalan front” against the budget. The Catalan Independence parties (ERC and SI) say the budget plunders Catalonia. The anti-Catalan nationalists stated the budget wants to please Merkel. The only party supporting the budget was the PP, which runs the Spanish Government.

The Catalan Government has drafted a plan regarding public employees for the 2012-2014 period. The aim is to reduce public spending in order to meet the deficit targets by reorganising civil servants, including their working conditions. The plan foresees the possibility of a reduction in salaries and working hours, as well as making their working conditions, tasks, and location more flexible. 6,800 temporary workers will have their hours reduced by 15% from April 1st. Unions have criticised the plan. However, the Catalan Vice President has asked unions to avoid exaggerating the issue and creating problems.