public deficit

The Spanish Government refuses to transfer some of the funds that it is legally obliged to pay Catalonia in 2011. Without this money, the Catalan Government will have difficulties meeting the deficit objective for this year. The Catalan Minister for Finance, Andreu Mas-Colell, considers the stance of the Zapatero Government to be “rude” and ignorant to the needs of Catalonia. Furthermore it forces the finances of Catalonia to be put in the spotlight. Every single Catalan political group, including the Socialists and the People’s Party, have criticised the decision of the soon to be former Spanish Prime Minister, and have expressed their support for Mas-Colell.

On Tuesday, the Catalan President announced a series of measures that will be included in the 2012 budget in order to meet the 1.3% deficit objective. The Catalan Finance Minister said that the fall in public spending will be smaller than that of this year. Ministers from the Catalan Government have been providing more details about the measures. The so-called “moderating ticket” to reduce the Catalan public healthcare system’s pharmaceutical bill has been questioned by the Spanish Government, as Barcelona “does not have the powers to do so”, despite managing the public healthcare system in Catalonia.

Artur Mas, the President of the Catalan Government, has announced the main austerity measures to reduce Catalonia’s public deficit and meet the 1.3% objective for 2012. Mas stressed that these measures are to be taken in order to reduce the deficit and not harm social policies. The Catalan People’s Party was satisfied with the plans, while the Left-Wing parties warned that they would harm the middle classes. The Catalan President also sent a warning to the next Spanish Prime Minister: a new “fiscal agreement” for Catalonia might be “one of the few opportunities left” to rebuild relations with the rest of Spain.

The trade union organising the protest has said that 70% of doctors took part in the strike, while the Catalan Ministry of Health reduced the figure to only 20%. Doctors are protesting at the budget cuts in the Catalan healthcare system in order to decrease the public deficit, which included a 5% salary reduction. The doctor’s union called for a strike on November 15th and 16th, coinciding with the negotiations on the 2012 budget and the Spanish elections. The Catalan Government stated that the strike asks for unrealistic salary increases and considered it has “failed”. 20,000 medical consultations have to be postponed.

Andreu Mas-Colell, former Harvard Professor and the current Catalan Finance Minister, travelled to London to meet with financial representatives. The objective is to explain, first-hand, the Catalan Government’s austerity plans and its efforts to reduce the deficit and to foster the economic recovery. Mas-Colell met with City investors, banks and media, such as the ‘Financial Times’.

The Catalan Government is obliged to reduce the public deficit and the public healthcare system is also subsequently affected by the budget cuts. Doctor and nursing unions are mobilised, while salary reduction and temporary lay offs are being discussed. Waiting lists have increased due to some hospital services being partially and temporarily closed, especially during the summer months. Many citizens have been protesting, in different demonstrations. The Catalan Health Ministry announced new maximum waiting times for severe interventions. In addition, some hospitals are reopening some operating rooms.

The Catalan Government has approved the new Law of Budget Stability, which foresees a gradual and significant reduction of the deficit in the following years. The law permanently fixes an allowed deficit limit of 0.14% of Catalonia’s GDP from 2018, two years earlier than the deadline required by the Spanish Constitution’s modification. According to the Catalan Finance Minister, Andreu Mas-Colell, the law demonstrates Catalonia’s “strong commitment to budget stability”. In addition, the law creates a fund to return public debt, which will be filled with any additional revenues or budget surplus.

The current Catalan Government, which took office last Christmas, hired an external auditor to better understand the state of the public finances. Deloitte has increased the Government’s deficit for 2010, from 3.86% to 4.2%, in line with the last data known and internally audited. The Catalan Minister for the Economy, Andreu Mas-Colell, explained that “one out of every three euros spent [in 2010] was not covered by tax revenues”. The main opposition party, which formed part of the previous Government and was in charge of finances, stated that their management cannot be made responsible for the deficit increase, as the deficit calculation criteria has changed.

The rating agency Fitch reduced Catalonia’s long term debt’s appreciation, going from A to A- because of the expected weak economic growth. Nevertheless, Fitch recognised the efforts to reduce the public deficit carried out by the Catalan Government. Fitch has lowered the debt rating of five Spanish Autonomous Communities and given others a negative perspective for the future. The Catalan Ministry of Finance thought that the reduction is due to “the international situation” and stressed that efforts are already made.

The Constitutional amendment limiting public deficit in Spain has been only approved with the votes from the PSOE and the PP at the Spanish Parliament. Four parties decided to quit the plenary room at the moment of the voting, whilst the Catalan moderate nationalists and the Basque moderate nationalists stayed but decided not to vote. They complained about the way the Spanish Socialist Party (PSOE) and the People’s Party (PP) have negotiated and agreed on the second constitutional reform without the input of the other parties.

“It means that we are not wanted, we are excluded, we are ignored” stated Artur Mas, President of the Catalan Government and leader of the Centre-Right Catalan Nationalist Coalition (CiU). It was the first time he has spoken on the Constitutional amendment limiting the public deficit that has been agreed on only between the PSOE and the PP. The CiU has protested against reforming the Constitution solely on the basis of the agreement of only two parties. Members of the PP and the PSOE have been trying to convince the CiU to support what both parties had previously agreed, and PM Zapatero (from the PSOE) asked the CiU to show some “moderation”.

Meanwhile, the Catalan Government, run by the Centre-Right Catalan Nationalist Coalition ‘Convergència i Unió’ (CiU), announces its own law on budget stability. The CiU feels excluded from the reform of the Spanish Constitution to limit public deficit, especially as they had been one of the key actors when negotiating and approving the Constitution in 1978. The CiU’s Spokesperson warned that, since “the Constitutional consensus” had been broken by the PP and the PSOE, “a great clash with unforeseeable and undesired consequences will happen” if nothing changes.

The Catalan Socialist Party (PSC) decides not to break the Socialists’ unity and not to force a call for a binding referendum on the constitutional amendment. In addition, the PSC rejects the request of the Centre-Right Catalan Nationalist Coalition (CiU) to include within the Constitution a limitation not only the public deficit but also a limitation on inter-regional fiscal redistribution. Moreover, the CiU stated that it has been excluded from the Constitution’s modification and therefore the Constitutional consensus is now broken.

The governing Spanish Socialist Party (PSOE) and the main opposition party, the People’s Party (PP) agree to amend the Spanish Constitution to limit the deficit from public administrations. Other parties have offered to support the amendment but have not participated in the actual writing of the text. The constitutional amendment will not set a deficit figure, which will be set through a law to be approved before July 2012. The PSOE and the PP have agreed that the deficit should be limited at 0.4%: 0.26% corresponding to the State and 0.14% to the Autonomous Communities. Other parties are insisting on the need for a binding referendum.

Many in Catalonia fear that a constitutional limitation to public deficit and debt may dramatically reduce Catalonia’s already restricted fiscal autonomy, which would not only affect self-governance but also the possibility to pay for investments or public services not guaranteed by the Spanish State. The fear goes beyond Catalan party boundaries regarding the second amendment to the Spanish Constitution, which would be approved through an “urgent procedure”, almost without public and political debate. Catalan senators could force a call for a binding referendum.