fiscal balances

An independent Catalonia would be totally viable, according to a report conducted by the research institute from the bank, Credit Suisse. In addition it would improve its ranking on the United Nation's Human Development Index (HDI) and reach the 20^th position while Spain would drop by three places and reach the 26^th position. The report claims that small countries tend to have a higher standard of living due to a number of factors, such as more efficient services, a higher chance of benefitting from globalisation and a more homogenous population. It uses these findings to predict the HDI of territories seeking independence, such as Catalonia, Scotland, Flanders and Quebec.

The President of the Catalan Government, Artur Mas, stated on Tuesday that the self-determination process is following 3 principles: respect for "the law and dialogue", "but also democracy", which will guarantee that citizens are able to vote. He said that the Government "has done its homework" by "providing information" about the process and how to build a new state, by ensuring "participation" from civil society, by proving "a will to talk" with Spanish authorities, and by showing "determination" to go ahead with the mandate resulting from the last Catalan elections to organise such a vote. Mas highlighted that the vote will be legal since it will use Catalan legislation. However, he asked citizens for "psychological strength" for the months ahead and future "challenges". Mas also emphasised that Spain's "economic recovery" is mostly "coming from Catalonia", since Catalans are "leading" the statistics regarding job creation, exports, tourism, scientific research and foreign investment.

Mariano Rajoy, Spain's Prime Minister, admitted that he "does not know what will happen on the 9^th of November", the day on which a majority of Catalan parties agreed upon for holding a self-determination vote, which goes against the Spanish Government's will. However, Rajoy immediately added that the Catalan President, Artur Mas, told him that "he will not be doing anything illegal", in their Wednesday meeting. The Spanish establishment considers such a vote to be illegal while a few constitutional experts say that such a vote could take place if there was the political will to authorise it. A two-third majority of the Catalan Parliament is determined to use Catalonia's legal framework to call a legal vote. Besides, in the press conference held on the Friday before his holidays, Rajoy also admitted that the self-determination debate is not affecting the economy. However, he added that any step generating "uncertainty or doubts" will "not help" the economic recovery.

The Catalan National Assembly, a grass-roots organisation, and Òmnium Cultural, a non-profit association promoting Catalan culture, are behind the massive independence demonstrations of 2012, 2013 and 2014, and in July they presented their new campaign 'Now it's time, united for a new country'. They aimed to mobilize the Catalan people for the self-determination vote scheduled on November the 9^th. There will be events throughout Catalonia and abroad during the 2 months before Catalonia’s National Day (September the 11^th). On that day, a massive demonstration in the shape of a giant V, for 'Votar' (To Vote) and 'Victòria' (Victory), will take place in Barcelona, which is expected to become the largest rally in the Catalonia's history. In addition, more than 30 ANC groups abroad are organising a worldwide campaign #votecatalonia. The political marketing firm Blue State Digital, which managed Obama's digital campaigns, is involved in the initiative.

On Thursday, the Catalan Finance Minister, Andreu Mas-Colell, admitted that Catalonia will not be able to meet the strict 1% deficit target imposed by the Spanish Government for 2014. In fact, the Catalan Executive had previously warned on several occasions that this deficit target was not realistic, despite the great austerity efforts undertaken over the past four years. In addition, despite Spain's economic recovery of 2014 – which is led by Catalonia – and therefore the increase of taxable activity, the Spanish Government will reduce the Catalan executive's funds by €500 million this year while the deficit target becomes stricter. On Wednesday, the Catalan President, Artur Mas, already stated that, considering the austerity measures adopted since 2011, further budget cuts cannot be undertaken in 2014 without dramatically damaging basic public services such as healthcare and education. Instead of relaxing the deficit target or transferring pending funds and debts to the Catalan Government, the Spanish Finance Ministry will reduce the interest rate that the Autonomous Communities have to pay back to 1% for the loans of the Liquifidity Fund (FLA).

According to a report published on Thursday by Barcelona's Chamber of Commerce, the Spanish Government's investment in infrastructure in Catalonia has dropped by 50% in the last 10 years, while it has been reduced by 25% throughout the rest of Spain in the same period. The President of the business association, Miquel Valls, stated that this reduction represents "a break"in the Catalan economy's growth, which could be in a better position to speed up the economic recovery. The report takes into account the executed investment made by the Spanish Government and its public companies in areas such as airports, high-speed railway or harbours. In 2006, the Spanish Parliament recognised "a historical" lack of investment in Catalonia when it approved the Catalan Statute of Autonomy and set a minimum investment percentage share to be made in Catalonia to compensate this in the next 7 years. This share was never respected.

On Tuesday, the Spanish Finance Minister, Cristóbal Montoro, rejected to review the funding scheme of the Autonomous Communities to grant them more resources, despite the fact that the Catalan Government is under-budgeted. On Wednesday, the Spanish Finance Ministry downplayed Catalonia's fiscal deficit by issuing the so-called fiscal balances, which calculate the inter-territorial fiscal transfers, posting a significantly low Catalan contribution. According to the Spanish Government's new calculations, Catalonia gave away €8.46 billion in 2011, representing 4.35% of its GDP. The figure is significantly lower than the Catalan Government's calculations: €15.01 billion and €11.09 billion, using two complementary methodologies used by the Spanish Executive in 2008 and agreed among independent university experts.

The Catalan Government, alongside the executives of the Basque Country and Castile and León, is leading the index of Autonomous Communities in terms of transparency, according to a study issued on Thursday by the organisation Transparency International Spain. These three Autonomies scored 100 out of 100 in the study, which was based on 80 indicators. They were followed by La Rioja (96), Galícia (94) and the Balearic Islands (93). The Region of Madrid occupies the last position in the ranking, with 65 points, behind the Region of Múrcia (79), the Canary Islands (80) and Castilla-La Mancha (84). The average across Spain is 88.6 out of 100. The study called upon regional governments to indicate the exact location of various data and information about elected officials, political appointments, organisation and personal wealth.

The Spanish Prime Minister, Mariano Rajoy, stated on Wednesday that he "will not join absurd debates" and will not "participate in the game" to negotiate Catalonia's self-determination vote since "the referendum is illegal and will not take place". Ironically, Rajoy accepted the request of the President of the Catalan Government, Artur Mas, to meet, but he has specifically rejected to talk about the purpose of the interview: the self-determination vote. In addition, the Spanish PM has downplayed the agreement backed by a two-third majority of the Catalan Parliament, which was answering a mandate resulting from the 2012 Catalan elections. On the same day the Spanish Finance Minister, Cristóbal Montoro, rejected "reinventing Spain" to better fit Catalans and therefore ruled out a deep Constitutional Reform. In addition, he also rejected setting up a new fiscal scheme for Catalonia, similar to the one that the Basque Country already has.

The Prime Minister of Spain, Mariano Rajoy, agrees to meet with the President of the Catalan Government, Artur Mas, who sent an official request last week, before the end of July. However, the Spanish PM wants to hold "a public meeting" and not "a discrete" talk, as the Catalan President suggested. Over the past few weeks, both Rajoy and Mas have been insisting they were willing to talk to each other but neither one of them was taking the formal steps to arrange a meeting. The last official meeting between the two of them was held a year ago, without taking into account the moments the two of them have coincided at the same event and have exchanged protocol words. Furthermore, before meeting with Mas, Rajoy received on Monday representatives from the pro-Spanish unity NGO Societat Civil Catalana, founded a few months ago. In all those years, Rajoy has not officially met with the grass-roots organisations organising the massive independence demonstrations in Catalonia.

On Friday, the Spanish Government reacted to the publication by the Catalan Executive of the so-called "fiscal balances" for 2011, which calculate how much money citizens from Catalonia paid in taxes to the Spanish Government and how much they received back in terms of services, grants and investments. After the weekly cabinet meeting, the Spanish Deputy Prime Minister, Soraya Sáenz de Santamaría, stated that the Catalan Government is "making the calculations" that "interest for a political message". "All the elements have to be put on the table and with maximum transparency", she added. The Spanish Executive only published those figures once, in 2008 with data from 2005, not respecting the successive requests from Parliament and transparency standards. The Catalan Government has been calculating these figures for the last years, following the advice of independent university experts. Between 1986 and 2011, Catalan gave away an average of 8% of Catalonia's GDP each year, an amount representing €16 billion per year in today’s money.

The Catalan Government issued on Thursday its own calculation of the so-called fiscal balances with the latest data available, which is from 2011. In that year, Catalans funded services and infrastructure in the rest of Spain for €15 billion, equivalent to 7.7% of Catalonia's GDP or €2,055 per citizen, using the monetary flow formula. Using the tax-benefit method, Catalonia contributed €11.1 billion, equivalent to 5.7% of its GDP. The two methods are "complementary", as the Catalan Finance Minister, Andreu Mas-Colell stated, although the first one makes less assumptions and is closer to reality in times of economic crisis and high unemployment. "Catalonia is a net and generous contributor" to the whole of Spain, he said. In fact, the figures for 2011 confirm Catalonia's "sustained" negative "fiscal balance" for the 1986-2011 period, with an average 8.0% fiscal deficit. This has been for decades a very sensitive issue in Catalan and Spanish politics, and even more considering the self-determination debate.

The Spanish Finance Minister, Cristóbal Montoro, announced on Friday that the publication of the so-called fiscal balances will be delayed until June, after he had promised to issue them by last December and by the current month of March. Montoro changed the calculation method in January, as the figures were used to support Catalonia's independence from Spain. Now, the new delay is "to improve" the report. This document shows how much money Catalan citizens and companies pay to the public authorities and how much returns to them through services, infrastructure and funds. A wide majority of the Catalan society has been complaining for decades that their contribution to finance services, infrastructure and funds in other parts of Spain is too excessive and they have asked for reducing such inter-territorial money transfers. Studies show that Catalans have been paying each year an average of 8% of Catalonia's GDP between 1986 and 2010, which represents 200% of Catalonia's total GDP.

The Catalan Government announced that, if the Spanish Executive finally decides to recentralise Catalonia's own taxes, they will take the issue to the Constitutional Court. The Catalan Finance Minister, Andreu Mas-Colell, stated that, if confirmed, "it would be a very provocative proposal" and "would make totally transparent, if it is not already transparent by now, the recentralising assault and the policy to dismantle the [current] Autonomous Community model". On Thursday an expert committee handed a report to the Spanish Government suggesting 270 measures to completely reform Spain's taxation system. The text states that the Spanish Government will "order" all the taxes, including those of the Autonomous Communities. Regional governments might continue having their own taxes but market unity will be a higher priority and taxes will always be "coordinated" by the Spanish Finance Ministry.

The Government of Extremadura, a region bordering Portugal, presented a study comparing its contributions to the rest of Spain with those of the other Autonomous Communities, particularly focusing on Catalonia. The main thrust of the report was that Catalonia receives the highest amount of money from the Spanish Government, which goes against absolutely all the previous studies that have established that Catalan taxes fund services, investments and infrastructure in the rest of Spain. The Catalan Finance Minister, Andreu Mas-Colell, characterised “the political document” presented by Extremadura’s Government as a “complete nonsense”. Mas-Colell, who was Professor of Economics at Berkley and Harvard from 1972 to 1995, said that the report lacked rigour and was not a technical work. The next day Extremadura’s President, José Antonio Monago, stated that Catalonia is “a privileged territory” and questioned whether it could repay its debt.