fiscal deficit

Artur Mas, President of the Catalan Government, signed an article published in New Europe’s special edition ‘Our world in 2014’, explaining why Catalans want to hold a self-determination vote on the 9^th of November, 2014. The European section of the publication includes articles from the French Prime Minister Jean-Marc Ayrault, the Italian PM Enrico Letta, the UK Finance Minister George Osborne and two EU Commissioners, Neelie Kroes and Androulla Vassilliou, among others. In his article, Mas asked the Spanish Government to “abide by its professed democratic principles and to allow the referendum”. The Catalan President explained why a majority of Catalans are supporting independence from Spain due to historical, political, economic, cultural and identity-related reasons. “In twenty-first century Europe, we solve these disputes peacefully and democratically, with ballot boxes and votes” he stated.

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 Socialist Party (PSC) proposes a “singular redefinition” of Catalonia’s “fitting” within Spain that should be accomplished urgently while waiting for a global reform of the Spanish Constitution. Maurici Lucena, the PSC Spokesperson at the Catalan Parliament, told the CNA that this temporary measure should avoid “the collision” between the two sides. The measure should “shield” Catalonia’s powers, language and culture from recentralisation and homogenisation attempts, and it would also include a fairer fiscal scheme. In the coming weeks, the PSC will try to convince the PSOE – to which is federated – about it. This proposal is quite similar to the Catalan Statute of Autonomy that was approved in 2006, but trimmed in 2010 by the Constitutional Court following an appeal from the People’s Party (PP) – which now runs the Spanish Government.

The Catalan Government’s Advisory Council for the National Transition (CATN), formed of renowned independent experts, emphasised that Catalonia’s independence from Spain would not represent breaking their affective and historical bounds. Furthermore, they insisted on the need to continue and even to increase cooperation “based on a new principle of equality and mutual respect between both parties”. They have suggested different ways to cooperate, through different structures. For instance, they proposed the creation of the ‘Iberian Council’ bringing together Catalonia and Spain, as well as Portugal and Andorra if they wished to, which would mirror the Nordic Council or the Benelux. Furthermore, the CATN issued three other reports, including a detailed analysis of Catalonia’s tax agency.

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 Spanish Prime Minister replied on Tuesday to the President of the Catalan Government’s proposal to discuss in a private meeting the question wording, date, and procedure of Catalonia’s self-determination vote. The Financial Times had also urged the Spanish Government to negotiate and make an offer to Catalans, while adding that “the ingredients” for a solution can be found in Catalonia’s question. While Mariano Rajoy answered he was open to meet with Artur Mas, he added he has nothing to negotiate on and nothing new to say. “The [Spanish] Government will not make any concession” regarding Catalonia’s self-determination. In addition, Rajoy insisted the vote “will not take place”. Furthermore, he added that Catalonia will not have a special funding scheme.

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”.

An enormous controversy has been raised around the academic symposium ‘Spain against Catalonia: An historical overview (1714-2014)’ that kicks off this Thursday in Barcelona. At the opening session, the Catalan Minister for the Presidency highlighted the “great affection” that Catalan people feel “towards Spanish society and its plurality and richness”, but not towards “the Spanish State and its institutions”. Furthermore he pointed out that the symposium does not aim “to impose anything”, but “to offer arguments” while “knowing that one single truth” does not exist. The event aims to reflect on the political, economic, social and cultural repression that the Spanish State has inflicted on Catalan people and institutions over the last 300 years. Prestigious university experts will give lectures on specific issues. However, the People’s Party, which runs the Spanish Government, and two other Spanish nationalist parties took actions aimed at cancelling the event.

With the title ‘Spain against Catalonia: an historical overview (1714-2014)’, this academic symposium aims to discuss the political, economic, social and cultural repression the Spanish State has carried out against Catalan institutions and people throughout the last 300 years. The event will offer more than 20 lectures given by prestigious university chairs. It is organised by Catalonia’s Science and Language Academy (IEC) and by the Centre of Contemporary History of Catalonia, which is linked to the Catalan Government. The symposium has raised controversy with its title. The People’s Party (PP), which runs the Spanish Government, has made cancelling the event a condition for holding a dialogue with the Catalan Executive. Furthermore, the PP, the anti-Catalan nationalism Ciutadans (C’s) and the Spanish nationalist and populist UPyD have filed a complaint against the symposium for “spreading hate”. Paradoxically, UPyD compared the symposium with “Nazism”.

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%).

Nils Schmid, Vice President of Baden-Württemberg and regional Minister for Finance and the Economy, said in an exclusive interview with the CNA that Catalans are the ones who have to decide whether they want to remain within Spain or to become independent. This process should “of course […] be based on a referendum”. The Leader of the Social-Democrats (SPD) in this state also added that his party is proposing to include the possibility of holding referendums at national level in Germany, which is currently not envisaged by the German Constitution. However, he “cannot imagine” an independence referendum for Baden-Württemberg. On other issues, Schmid pointed out that “fiscal consolidation is not enough” and has to come with “structural reforms” and policies to stimulate growth. He also welcomed Catalans who are going to Germany to find job opportunities.

This coming 11^th of September – which is Catalonia’s National Day – pro-independence supporters have organised a gigantic human chain called the ‘Catalan Way Towards Independence’ that will cross Catalonia from North to South stretching 400 km and passing through some of the main cities, such as Barcelona, Girona and Tarragona. After having organised the 1.5 million-strong demonstration of 2012, the civil society platform Catalan National Assembly is preparing a new massive demonstration that calls for independence from Spain. This year’s peculiar demonstration is inspired by the ‘Baltic Way’ of 1989, which gathered 2 million people forming a 670 km-long human chain crossing Estonia, Latvia and Lithuania. The ‘Baltic Way’ was organised exactly 24 years ago and issued a manifesto that read “a common European home can only by set up if all European nations are granted a free right to self-determination”.

In the last three years, 1,060 companies have moved their headquarters from Catalonia to the region of Madrid, according to a report published by Madrid’s regional Government. The report states that most of them took the decision because of the lower taxes that exist in Spain’s capital, compared to other areas such as Catalonia. Since 2010, 5,000 companies based in the rest of Spain decided to move to Madrid; 21.4% of them were from Catalonia. Paradoxically, 43 cents out of every euro paid in taxes in Catalonia is to pay for investments and services made in other parts of Spain, which turns into an annual fiscal deficit of 8.5% of Catalonia’s GDP, meaning that Catalans are obliged by the Spanish Government to give away €16.5 billion. Meanwhile, the Catalan Government is under-budgeted and obliged to implement severe budget cuts and raise taxes to balance the budget.

The number of public employees in Catalonia has been reduced by 4.76% over the last year, while in the whole of Spain the reduction was of 3.97%, due to the budget cuts in the public sector. However, the number of civil servants in Catalonia was already significantly lower than the Spanish average, according to a study issued by the SME association PIMEC. In January 2013, there were 40.7 civil servants for every 1,000 inhabitants in Catalonia, while the Spanish average was 57.4 and it reached 79.6 in the Autonomous Community of Extremadura. In fact, 26.7% of the Extremadura’s workforce is employed in the public sector, while the percentage drops to 11.1% in Catalonia. PIMEC stated in its report that, if Catalonia had the same proportion of public employees as the Spanish average, its unemployment rate would drop from 24.5% to 20.5%, with 150,000 fewer jobseekers.

Since 1986, the Catalan Government has its own lottery system, which brought a profit of €40 million last year. The Catalan lottery administration dedicates 60% of the revenue to prizes and the remaining 40% to finance public policies. In total, there are six lottery games, including scratch cards and lotto draws, but there are no specific draws for special days, as exists in the Spanish Government’s Christmas Lottery. After a proposal from representatives of shopkeepers’ associations, the Catalan Executive decided to launch a similar Christmas draw, with tickets worth 5 euros. 80% of the revenue will go towards prizes and 20% will finance children’s assistance programmes. €15 million will be put on sale. The opposition has been surprised by the initiative and stated they were hoping it was not the only measure to increase revenue.