CATALONIA -- Catalan News Agency - Catalonia posted a fiscal deficit of 7.7% of its GDP in 2011, equivalent to €2,055 per citizen

Catalan News Agency - Catalonia posted a fiscal deficit of 7.7% of its GDP in 2011, equivalent to €2,055 per citizen

Catalonia posted a fiscal deficit of 7.7% of its GDP in 2011, equivalent to €2,055 per citizen

CNA

Barcelona (ACN).- 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 €15.01 billion,
equivalent to €2,055 per citizen or 7.7% of Catalonia's GDP, using the
monetary flow formula (measuring where the investment takes place).
Using the tax-benefit method (measuring welfare), Catalonia contributed
€11.09 billion, equivalent to 5.7% of its GDP. The two methods are
"complementary", as the Catalan Finance Minister, Andreu Mas-Colell
stated, although the monetary-flow one is more widespread, 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 and "Catalans pay for everything they receive and
substantially more", he added. In 2011, Catalans contributed 19.2% of
Spain's total public revenue, according to Mas-Colell’s calculations.
However, they only received 14.0% of the spending of the Spanish
Government and associated bodies (independent agencies, public companies
and the Social Security system). Without taking Social Security into
account – which is not managed in a discretional way since it is run
according to people's rights and contributions, Catalans only received
9.4% of the spending, while it represents 18.6% of Spain's GDP and 16%
of the population. In fact, the figures for 2011 confirm Catalonia's
"sustained" negative "fiscal balance" for the 1986-2011 period, which
posts an average 8.0% fiscal deficit per year, according to Mac-Colell.
This "fiscal deficit" directly affects the funding of Catalonia's public
services, which receive less funding than poorer parts of Spain and
therefore put vulnerable Catalan citizens into a situation of
disadvantage.  In addition, it slows down the economic growth and
damages the competitiveness of the economy. In a time of economic
crisis, with drastic budget cuts in place, public services under stress
and Catalan companies making great efforts to export, this "fiscal
deficit" becomes more obvious and a greater problem.

Catalonia's fiscal contributions have been for decades a very
sensitive issue in Catalan and Spanish politics, and even more
considering the self-determination and independence debates of the last
two years. However, the issue has been on the table for a very long
while. The wide majority of Catalan society (including all business
associations and most of the political parties) has been asking for
decades to reduce such contribution levels and, at the same time, to
keep a certain degree of solidarity with poorer regions. However, the
Spanish Government, no matter if it was run by the People's Party (PP)
or the Socialist Party (PSOE), has rejected to significantly modify this
trend, which under-budgets public services in Catalonia and damages its
economy and competitiveness.

A Fiscal Agreement aiming to reduce such contributions

In this line, the President of the Catalan Government, Artur Mas,
proposed to the Spanish Prime Minister Mariano Rajoy to negotiate a
Fiscal Agreement for Catalonia, similar to the one the Basque Country
and Navarra have. In this new Fiscal Pact, the Catalan Government will
have the powers to collect all the taxes and will transfer an amount to
the Spanish Executive to pay for three basic concepts: general services,
services and investments made in Catalonia and solidarity contributions
with poorer regions and countries. The main advantage of this is that
the Catalan Executive would control the money and would know exactly how
much  is collected and how much is returned. The proposal for a new
Fiscal Agreement had been debated in Catalonia since 2010 and a group of
political parties agreed to push for it in mid-2012. In September 2012,
Artur Mas met with Mariano Rajoy a few days after the massive
pro-independence demonstration that gathered 1.5 million people in
Barcelona (according to Catalan Police) and proposed this new Fiscal
Pact. Rajoy completely closed the door and refused to even talk about
it. This rejection fuelled the camp of those supporting independence.

The Spanish Government has only published the fiscal balances once in 37 years

There is a persistent lack of transparency regarding such figures at
Spanish level and some politicians outside Catalonia have downplayed or
even directly denied the fact that Catalans are greatly contributing to
fund poorer parts of Spain, or have accused Catalans of being greedy.
The Spanish Government only published such figures once in the 37 years
of democracy. In 2008, the Spanish Finance Ministry stated that
Catalonia had a fiscal deficit between 8.7% and 6.4% (depending on the
calculation formula) in 2005, the only year included in the study. Since
that moment, the Catalan Government started to publish its own
calculation every year, including the accumulated figures since 1986,
when there is comparable data available.

The current Spanish Government promised to publish again the fiscal
balances but with a new methodology in December 2013. In January 2014,
the Spanish Finance Minister, Cristóbal Montoro, stated that they would
be published in March and he underlined that the previous methodology
"was fuelling independence arguments". Meanwhile, many members of the
academia criticised the decision to change a methodology in line with
that used in other countries and designed with university experts. When
March arrived, Montoro said they would be issued by June.
At that time, Catalan business associations started to urge for issuing
the fiscal balances with the two methodologies and criticised the
Spanish Government for delaying their publication.

The fiscal deficit of 2011 would almost pay for the entire healthcare, education and social budgets

The Catalan Government, as it has been doing over the past few years
each spring, is publishing its own calculation of the fiscal balances.
With the monetary flow formula, Catalans contributed €54.91 billion in
2011: €47.73 billion corresponding to revenue of 2011 and €7.19 billion
corresponding to the debt generated this year (which will have to be
paid in the coming years). The Spanish Government and associated bodies,
including the Social Security, spent €39.90 billion in Catalonia. This
results in a negative balance of €15.01 billion, representing 7.7% of
Catalonia's entire GDP. In 2011, the Catalan Government spent €16.32
billion in healthcare, education and social welfare (considering it
exclusively manages the entire health and education systems in
Catalonia). In addition, the Spanish Government's spending in Defence
and Security (the military and police) reached €15.27 billion.
Furthermore, in that year, Spain received a total of €13.27 billion from
the European Union and contributed just €12.12 billion to the EU
budget.

More on

Andreu Mas-Colell, austerity measures, budget cuts, Catalan Budget, Catalan Economy, Catalan Government, Catalan Independence, Fiscal Balances, Fiscal Deficit, GDP, Independence, Self-Determination, Spanish economy, Spanish Government, Spanish Nationalism

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The
Catalan Finance Minister, former Harvard and Berkeley Professor, Andreu
Mas-Colell presenting the 2011 fiscal balances (by J. R. Torné)

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