deficit targets

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 will file several formal demands for payment of the €2.02 billion the Spanish Government legally owes Catalonia from the 2008-2013 period. The money represents 1% of Catalonia’s GDP or 7% of the Catalan Government’s budget. According to the Statute of Autonomy, which was approved by the Spanish Parliament and came into force in 2006, the Spanish Government was obliged to invest a percentage equal to or higher than Catalonia’s share of Spain’s GDP between 2007 and 2013 in order to compensate for an historical lack of infrastructure investment. If it was not doing so, the Spanish Executive had to compensate Catalonia financially. The measure was adopted after exhaustive negotiations and was essential to the approval of this law by the Catalan people through a binding referendum. However, the Spanish Government never honoured it. Madrid compensated Catalonia for the lack of investment in 2007, but not for the remaining years.

The Catalan Government deficit amounted to 1.6% of the GDP between January and October, and consequently missed the 1.58% target imposed by the Spanish Government. Madrid was also not able to comply with the limit set for the central government, and had a deficit of 3.96% in November, higher than the 3.8% required for the whole year. The Spanish autonomous communities’ total deficit amounted to 1.12% of the GDP in October, which was in line with the yearly objectives, according to the Spanish Government. When considering the deficit of the autonomous communities, the Spanish state and the Social Security, it amounted to 4.87% of the GDP. The payments of the banking bail-out will also be included in this figure at the end of the year. Brussels had set a global limit of 6.5% for Spain in 2013.

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.

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”.

Trade unions and the two associations of municipalities in Catalonia have issued a joint manifesto to protest against the Spanish Government’s Local Administration Reform. This reform recentralises powers and services, reducing the municipalities’ capacities and transferring resources to the Provincial Councils, political bodies associated to Spanish centralism and whose members are not directly-elected. The manifesto criticises the Spanish Government “for not having faced any significant reform of its heavy structure”, despite managing 53% of Spain’s public expenditure. The Spanish Government is also forcing the Autonomous Communities to reduce their services and structures.

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 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.