deficit

Artur Mas, the President of the Catalan Government answered the Spanish Vice President for Economy, who yesterday suggested that he should raise taxes. He also wants to stop the debate about which percentage of the public expenditure should be cut, after the insistence from Madrid to go beyond the 10%. The Advisory Council for the Economic Recovery met today for the first time. Mas also announced a Catalan summit on economic recovery scheduled for the 25th of March.

The Catalan Government’s initiative received the support of its own group (CiU) as well as votes from the opposition: the Catalan Socialist Party (PSC), the Catalan People’s Party (PPC) and the Left-Wing Catalan Independence Party (ERC). The Catalan Minister for Economy Andreu Mas-Colell explained the details of the legal initiative that was passed via an urgency procedure. The initial amount will be of 2,613 million euros.

The figure represents approximately 40% of the Catalan Government’s deficit in 2010. Barcelona’s Chamber of Commerce maintains a growth forecast of 0.8% for the Catalan economy in 2011.

After yesterday’s meeting with Spanish Prime Minister Zapatero and the Catalan President, nine Autonomous Communities are protesting and accusing Zapatero of giving privileges to Catalonia. The Catalan Government rejects these accusations recalling that all the discussed transfers were pending issues that had already been agreed on. The new debt will be used to re-finance previous debt and reduce the deficit. This evening, the Spanish Ministry of Economy clarified that Catalonia’s authorisation will be applicable to all the Communities with an approved viability plan.

The Catalan Government will be able to issue more public debt and the State will pay Catalonia 759 million euros that are pending from 2008. According to the Catalan Government, the Spanish Executive owes more than 2,100 million euros, although the figure could be larger. The Catalan President, Artur Mas, claimed this amount and the Catalan Government’s capacity to issue new debt, after having presented a viability and austerity plan a week ago. Both leaders discussed pending competence devolutions today regarding already approved legislation and agreements, but without concrete results. Prime Minister Zapatero was also very interested in this meeting as he wants to count on votes from Mas’ party in the Spanish Parliament. Mas confirmed that his party would support Zapatero’s measures to foster the economic recovery, such as the pension system reform agreement or a new framework for SMEs.

The Catalan Government sent its austerity and viability plan to the Spanish Ministry of Economy for reviewing yesterday. The plan reduces the public deficit in more than 2 points and sets it at 1.3% for 2011. The finances of the Catalan Government are generating a wide debate at the moment, which is even been covered by international media.

The Chairman of the Centre-Right Catalan Nationalist Group in the Catalan Parliament Oriol Pujol stated this morning that the Catalan Government could “practically not pay the salaries” of public workers. However the Catalan Government from the same party calmed public opinion saying that although the situation was difficult, civil servants would not need to worry. The Catalan Government needs new credits to get liquidity and is expecting authorisation from the Spanish Government.

The President of the Catalan Parliament Núria de Gispert presented the Chamber’s austerity plan today. Staff will be reduced by 10% within the next 4 years, official duty cars by 50% and the scheduled enlargement plan will be put on stand by.

The President of the Catalan Government Artur Mas said that his Cabinet would reduce the Government’s budget for 2011 by 10% in order to cut public deficit. Speaking at the Catalan Parliament today, Mas accused the Spanish Government of not having paid 1.000 million euros last year as agreed. “It is very easy to cut their own deficit by creating deficit to other administrations”, he emphasised.

In an interview with the Financial Times this weekend, the Prime Minister Zapatero threatened to intervene in some Autonomous Communities’ budgets. Today the Spanish Secretary for Economic Affairs reiterated this threat. However the Catalan Government has stressed that Catalonia has in fact no problem with its public deficit. Catalan political parties reminded the Spanish State that the Autonomous Communities only have one sixth of the entire public debt throughout Spain.

The new Catalan Government announced today that the budget for 2011 (currently the 2010 has been extended) will be ready within the next 4 months and approved before the summer break. The Government’s Spokesperson, Francesc Homs, said that for the first time, the budget will be “clearly smaller” than the previous year’s. In addition, the new Government asked for an external audit on the Catalan public administration’s finances.

Artur Mas, the newly elected Catalan president has a new plan up his sleeve. He will cut 23% of the high-ranking positions and reduce the number of political advisers. Public organisations and quangos will also be affected by this austerity measure. The government is forecasting a deficit of 7.800 million euros.

The difference between what an autonomous community produces in terms of revenues and what it finally receives, once the Spanish State has redistributed those revenues among all the communities, has only officially been quantified once in history. It was in 2005, following an agreement of Prime Minister Zapatero with the Catalan nationalist forces. Catalonia’s political and business class have called for the systematic publication of the “fiscal balances” several times.

Catalonia must be able to co-manage key infrastructures such as Barcelona’s Airport and receive a special economic agreement like the one the Basque Country and Navarra have. Artur Mas, President of the Centre-Right Catalan Nationalist Party (CiU), explained the main line of his economic programme today. Mas sent a message out to Prime Minister Zapatero (PSOE) and the Conservative People’s Party (PP).

The Governor of the Bank of Spain, Miguel Angel Fernández Ordoñez, warned about the need to limit the capacity of local and autonomous communities’ administrations to increase their public debt. He wants legal limits. He also alerted that a plan B is needed if the economy worsens.