Reply to The Times by former IMF and World Bank Adviser

To the Times Editor:

Sir/Madam,

Your recent editorial, “Mas Uprising. Splitting from Madrid would hurt Catalonia at least as much as it would Spain”, asserts that Catalans would regret their independence from Spain because “[Catalonia] is also burdened with Spain's biggest debt.” However, though Catalonia has the highest debt in absolute terms (but not on a per capita basis) of all the autonomous regions in Spain, it is equivalent to only about 25% of itsGDP. This level is well below the debt limit agreed to by the countries of the European Union (60%) and is among the lowest in European countries – certainly below the UK's.

Moreover, the debt accrued to date is attributable precisely to Catalonia's lack of control over its tax revenues (95% of which go to the central government of Spain). We do not have authority over the level of the budget we are allocated, which is much less than we pay in, and which results in a structural fiscal deficit of about 8% of our GDP (higher than any of the federal governments in Western Europe). Neither do we control when the revenues are received. Catalonia is rich because we are a country that saves and exports, increasingly outside of Spain. Thus an independent Catalonia, controlling both its revenues and its expenditures, would have no problem servicing its debt.

The question of economic sustainability your editorial raises should be asked of Spain, not of Catalonia. Spain has received about 130 billion Euros of free contributions from the European Union over the past 10 years or so, but it has so mismanaged its economy that at present it is saddled with a level of debt close to 90% of its GDP. Among other financially unsustainable investments, Spain has developed the largest network of fast trains in Europe. True, British tourists riding the trains in Spain enjoy a level of service not available in the UK, but the heavy subsidies the train network requires are financed in large part by the Catalan people and by the European Union, of which the UK is a dues-paying member.

Vicenç Ferrer
Former Principal Economist in the World Bank
Former Adviser in the International Monetary Fund
Fundació Catalunya Estat