The greatest solidarity operation in history

When the balances for the 2006 aid funds given by the European Union to Spain came out, a senior European Commission official, together with a journalist with three college degrees and a prestigious international career published a book called The greatest solidarity operation in history. A chronicle of the EU regional policy in Spain.

In the introduction it says: 

“Spain has become the most favored country in the whole world by a flow of solidarity [i.e., transfers] from other countries. This Spanish record is three times higher than the total amount of the Marshall Plan to all the countries who received it after World War II.”

More recently, Enric Juliana, a correspondent for La Vanguardia in Madrid and well-known essayist, echoed this book in two articles entitled Three Marshall Plans and One hundred and thirty Euros per person per year. These articles are, together with the aforementioned book, very good material to understand what the resources received from Europe between 1986 and 2006 have represented for Spain.

Starting point

We have to go back and consider Spain in 1986—47 years after the end of the Civil War, 27 years after the Stabilization Plan moved the country away from wretched isolationism, and 14 years after the third Development Plan. Spain added 38.4 million inhabitants to the European Union, with a per capita income equivalent to the 68% of the European average. It was still a poor country among the 12 member states. Germany, France, Italy, United Kingdom, Netherlands, Belgium, Denmark, Ireland and Luxembourg were prosperous. Only two countries, with smaller populations (Portugal and Greece), were below Spain.

The Single European Act, signed in 1986, added the principle of social and economic unity to allow a balanced development of all the member states. In January 1995, three new members—Austria, Finland and Sweden—joined the union without substantially altering the imbalance.

This long relative situation explains why—in application of the balancing strategy defined by the Single Act—Spain has benefitted by receiving such an amount of resources during these years.

Subsequently, however, the incorporation of 12 more countries with lower economic levels between 2004 and 2007 altered the situation significantly. In the union of 27 member states Spain is no longer considered a poor country. It’s in the European average, and can no longer formulate the vehement requests given by the former socialist president Felipe González, or the cocky demands made by Aznar (considered by himself as the reincarnation of Phillip II of Spain).

What Spain received from Europe

The book mentioned earlier informs us that during those 20 years the total aid received was more than 118 billion €. There are other transfers that are not included in these figures, however, such as the more than 42 billion € corresponding to the FEOGA Guarantee program to help the agricultural sector (politics in prices and markets and compensations to the reform of the Common Agricultural Policy in 1993). With the incorporation of just the figure coming from the FEOGA, the sum reaches 160 billion €.

The compensation

To get the true picture of the transfers, we must establish the balance between the amounts received by Spain from several European Funds and the contributions made by it for being part of the Union.

For this we will use new data given by a reliable publication: the book 20 years of Spain in the European Union published in 2006 by the Royal Institute Elcano and updated the next year by the same authors in an article of the journal Política Exterior (Foreign Policy).

The total amount received as shown by this source is higher than the one recorded in the aforementioned book, because it includes other entries such as the FEOGA and adjustments for the variation in the value of the euro during these 20 years.

FINANCIAL RELATIONS BETWEEN SPAIN AND THE EUROPEAN UNION – PERIOD 1986 - 2006

Aid received by Spain                                             211 billion €

Contribution from Spain to the EU                          117 billion €

Net amount received by Spain                                 93 billion €

   

Effects of this flow of European aid funds

To keep it brief, we will reproduce a fragment by the authors of this report:

“This flow helped to finance a large amount of structures and social unity programs. This produced a significant reduction of the spread of per capita income between the different autonomous communities regarding the Spanish average, with implies a decrease of the disparities between regions."

So much magnificence calls for caution. Reading the book written by professor Germà Bel, Spain, capital Paris, it’s enough to see how and with which criteria the extraordinary European resources have been spent, and the fallacy of having put them into the GDP of the regions. This has been an incidental resource with an expiration date and has been mostly poured into the sink of the well of irrationality. Antoni Vives goes deeper into that subject in the newspaper Ara published on April 11th and July 4th.

“In Spain they want to build a nation that is not real,” says Germà Bel. The political criteria (i.e., the obsession to turn the whole peninsula into the surroundings of Madrid) prevailed over economic rationality and efficiency. Structures have been multiplied without giving productive capacity to the territories. It was a charity. Using the Chinese phrase, they were given fish, but not rods or fishing skills, they were given yachts but not fishing boats. They have mortgaged the future in empty projects, unsustainable because of their huge costs, and lost yet another historical opportunity.

The real Greatest Solidarity Operation in History: Catalonia

FINANCIAL RELATIONS BETWEEN SPAIN AND CATALONIA – PERIOD 1986 - 2006

Balance money received by Spain (Fiscal Deficit 1986-2001)              93 billion €

Balance money received by Spain (Fiscal Deficit 2002-2006)              72 billion €

Balance money received by Spain (Fiscal Deficit 1986-2006)            165 billion €

As these numbers show, however, while the citizens from the prosperous countries in the EU (285 million of taxpayers) have contributed 93 bilion € to Spain, the 6.5 million Catalan taxpayers have contributed 165 billion €—nearly double the amount in absolute value, or 78 times more in per capita contribution.

These endemic fiscal deficits—net contributions from Catalonia to the Spanish state, by the decision of the multiple Spanish governments—have historically been put at between 6% and 10% of Catalonia's GDP. In recent years (2007-2010), the figures have been estimated to be around 10% of the Catalan GDP (20 billion € per year, equivalent to 2,740€ per capita).

If we take the accrued fiscal deficit up until 2006 (165 billion €) and add the estimates for up until 2010, we get a “solidarity contribution figure” which is higher than 240 billion €. What this shows is that those payments from Europe—“the greatest solidarity operation in history”—in fact are more than doubled by the accumulated Catalan fiscal deficits.

The song of the angry men

This systematic financial drainage blocks Catalonia’s natural progress and asphyxiates its economy, as we can see in the current reductions in public expenses—cuts which would have been unnecessary in a Catalonia without the fiscal drain. The situation is, as always, unfair and unsustainable. In Germany, with its strong economy, the deductions from the more prosperous Länder (states) to help and stimulate the poorer ones (such as in the East) are limited by law to 4% of the GDP.  These transfers are, moreover, time-limited. The Germans know that perpetuating such magnanimous transfers has the tendency to spoil the beneficiary instead of stimulating them.

You can read this article in Spanish and German.