Madrid saps Catalonia fiscal claims

The regional fiscal balances presented to the press are mainly targeted to chide the Catalonian government for claiming the region is heavily penalised in fiscal terms. It reduces to 8 billion the net fiscal deficit for Catalonia, slicing in half the amount advanced by its authorities,well below the negative balance supported by Madrid regional government.

The study has been undertaken on a cost-benefit basis, splitting expenses according to potential use by citizens. Thus, the high-speed railway from Barcelona to Madrid is supposed to benefit passengers in both cities rather than the areas where investment was made. Such an approach needs to rely on conventions open to challenge. For, it seems rather difficult to ascertain how people living outside Madrid can profit from the Prado Museum budget. The assumption that 25% of overall expenses benefits them on a GDP breakdown basis, amounts to mere wishful thinking. Yet, most public budget items can be split in a rather reasonable way.

Most expenses, such as pensions indemnities, education and health, can be attached to territories according to the number of potential or real beneficiaries. The study neutralises the effect of overall deficit by supposing a balanced budget. It splits tax income, according to the region where taxpayers live. Corporate tax receipts are evenly split between consumers, enterprises and workers. All in all, the breakdown leads to a fairer view than simple nominal fiscal balances. Yet, it has the potential to ignite bitter bickering over futile issues.

For all its merits, publishing this controversial study puts the lid over any attempt to defuse the self-rule wrangle by offering better budgetary conditions to Catalonia. Thus, it seems we are heading for full fledged confrontation. As the Catalonian government is deprived of a face-saving way out, it might be forced to embrace a radical road to independence. There is little hope the meeting between Rajoy and Mas can find a middle-of-the-road solution, when no money is put on the table.

About the Author

JP Marin Arrese
Juan Pedro Marín Arrese is a Madrid-based economic analyst and observer. He regularly publishes articles in the Spanish leading financial newspaper 'Expansión'.

1 Comment on "Madrid saps Catalonia fiscal claims"

  1. What a contrast with the first exercise by the Spanish govenrment in evaluating the scale of interregional fiscal exchanges, in 2008. It then used several alternative ways of calculating the outcome.

    This time, as Sr. Marín rightly says, the regional breakdown of public income and expenses is expressly and deliberately “aimed at rebuking [rebutting?] unfair fiscal claims from Catalonia’s regional government”, so anyone can easily gauge the level of political manipulation the Spanish government is prone to unblushingly engage in.

    The method used ignores where the tax money actually goes, the criterion used in other countries (which leads to a much higher figure for Catalonia’s fiscal deficit). Instead it is based on a somewhat subjective calculation of who benefits from the fact that ministries, national art museums, the main international airport, etc. are based in Madrid. This has perverse effects, among other things, (a) that Madrid appears to run up a massive fiscal deficit, which is nowhere to be seen in the streets of that beautiful city, and (b) that is apparently grants the Basque country a handsome fiscal surplus.

    A separate issue is that in my view it is Spain, and not Catalonia, that needs “a face-saving way out” of the current deadlock. It is Spain’s government that has dug its heels in, and keeps sending the Catalan people one threat after another. It is the governing party in Spain that is largely to blame for having driven the majority of Catalans to give up all hope of ever being able to survive, as a people, inside a country whose masters have for centuries been deeply, profoundly ethnic in imagining Spain. The humilitating snub in 2010, when the Constitutional court toppled whole chunks of Catalonia’s regional constitution despite the draft having been first “lathed” by the Spanish parliament and despite it having been voted by the Catalans, marked the widely-expected turning point in Spain’s hopes to retain Catalonia.

    Coming back to the present, Catalonia’s Government and a comfortable supporting majority of its Parliament are acting on their 2012 electoral commitments and promises (similar to those of Scotland), no more no less. Up to now it is clear in my mind that it is the Spanish government that is giving clear signs that it wishes “to embrace a radical road” to forestall independence. But in 21st century Europe, my hope (and that of Spain’s plentiful creditors; see is that such undemocratic measures will be nipped in the bud.

    BTW, could you please correct Sr. Marin’s reference to the President of Catalonia, Artur Mas, asd its “chairman”, please?

Leave a comment