The excessive deficit procedure in the EU and its application to Catalonia

The EU has defined a Community policy to achieve healthy and sustainable public finances, but Spain does not know how to deal with the crisis, because it deceives and does not comply with the EU. Spain does not know how to build a modern economy for the 21st Century and condemns its people to poverty. By contrast, Catalonia, which is a dynamic society, a net exporter oriented to the world, is making a strong effort to rebalance its public finances and might boost the economy further if it had its own state structures. The Spanish government is lying when it says that the Catalan government and other regions are responsible for the deficit.
Autonomous regions represent 35% of total public spending, even though they are responsible for the two largest expenditure items: health and education.

Europe has set targets for deficit and debt to GDP of 3% and 60% respectively. Spain's is approaching a deficit of 10% and a debt ratio of 100%. The EU, after allaying its initial demands, is now asking Spain for deficits below 6.3%, 4.5% and 2.8% for 2012, 2013 and 2014. The  2012 deficit has already been breached and the same will probably happen in the following two years.

The economic model is not generating sufficient growth to return the debt, leading the country to EU intervention first, and subsequently to bankruptcy and a possible haircut, which will directly affect the Pension Reserve Fund.  The Spanish extractive and speculative model has generated public debt in 2013 of €22,172 per person (€88,869 for a family with two children).

Spain's deficit is distributed among the different public administrations. The Spanish State imposes a discretionary distribution of the deficit allowance: 71.4% for central government and Social Security, 23.8% for the autonomous regions and 4.8% for local authorities, while spending is 51 %, 35.7% and 13.6% respectively.

With a fairer distribution of the deficit, Catalonia could have financed more than €1,392 million in 2012 and reduce spending cutbacks, with a deficit of 2.2% of GDP and total debt of €4,367 million.

An independent Catalonia will be able to apply its own growth model and meet the EU criteria, increasing its income from €30bn to €70bn in 2 or 3 years, a risk premium of around 140 points and a rating somewhere between AA and AAA (values similar to Belgium's).

Spain is deliberately throttling Catalonia financially and is keeping any room for manoeuvre to itself, for its non-productive economy (broken banks, frenzied speculation, infrastructures in the middle of nowhere, etc.), stifling the dynamic Catalan economy. Spain is forcing an odious debt upon Catalonia, at the same time as it systematically blocks any new income for the Catalan Government (Euro per prescription, court fees, tax on bank deposits).

The Catalan Business Circle requests the Government accept the EU rules and only the EU rules. A less demanding objective than that arbitrarily set by Spain would allow Catalonia to reduce the pace of deficit adjustment. This implies a deficit for 2013 of 1.6% instead of 0.7% that Spain wants to impose. The government of Catalonia could thus finance €3,183 million, which would allow us not to make additional cuts.

Joan Cabanas

Catalan Business Circle (Cercle Català de Negocis)