Budget
Business 26/07/2022

Generalitat wrests margin to spend additional €500m from State

Aragonès and Sánchez agree to relax deficit target from 0.1% to 0.3% of GDP in 2023

3 min
Jaume Giró and Pere Aragonès talking in the Parliament, in an archive image.

BarcelonaAfter months of public and private pressure, the Catalan government has obtained a flexibilisation of regional governments' reference deficit rate for 2023. As ARA has been able to confirm with sources from the Spanish and Catalan executives, this limit, which was to be 0.1% in 2023, will finally be 0.3% of GDP. All regions will benefit, and in the case of Catalonia this means around €500m (some sources in the Generalitat say €470m, while others put it at €525m).

Sources from the Spanish Ministry of Finance confirmed this new limit and recalled that, since it increases what regional governments may spend, the budgetary imbalance in which the central administration may incur will be reduced. The stability programme continues to set an expected deficit of 3.9% of GDP for next year for the State as a whole.

It must be said, however, that strict fiscal rules have been suspended and that this deficit reference rate is not binding. However, the figure is important for the preparation of budgets, and in any case the Generalitat has always wanted to stick to these rates out of "financial prudence" and to "avoid problems when it comes to paying bills", as has been repeated in recent months by Catalan Economy minister Jaume Giró

Joint effort

In recent months, both Catalan president Pere Aragonès, and Giró himself have insisted on the need to give more leeway to regional governments in view of the persistence of covid and the new crisis situation derived from the upturn in inflation and the problems in supply chains, which have been aggravated by the war in Ukraine. The sources consulted by this newspaper agree in pointing out that this decision by the Spanish government has been a success shared by Aragonès and Giró. "It has been coordinated pressure", these sources point out, although the final agreement was snatched by the president.

Both Aragonès and Giró have taken advantage of practically every public event to demand this relaxation, in some cases in the presence of Spanish president Pedro Sánchez, as happened during the presentation of the Pimec awards on June 27. That evening, the Catalan president insisted on this demand in the presence of the president of the Spanish executive. According to Aragonès, "the Catalan economy's good data last year can be explained, in large part, by the capacity to mobilise resources the Generalitat was able to carry out", and he stated the need to "have additional resources". "It does not obey any logic that the State resists enabling the Generalitat to give a greater and absolutely necessary support to the country's companies", he insisted.

Minister Giró has spoken of the deficit margin in recent months, and asked to extend it to "be able to meet the extraordinary expenses in health, education and social rights the pandemic and the war in Ukraine have generated". Giró claimed that the deficit margin for 2022, of 0.6% of GDP, should be raised to 1%, while for 2023 it should be 0.4%. In this sense, sources from the Catalan government pointed out that the relaxation of the reference rate of the deficit "wrested" from the Spanish government is "positive", but regretted that a "greater effort" was needed from Pedro Sánchez's government.

An agreement outside the negotiating table

Catalan government sources have stressed that this agreement has taken place separately from the political conflict and the talks taking place at the negotiating table between the two administrations. "In this area we continue to bet on the de-judicialisation and obviously to solve it through amnesty and self-determination," explains a Catalan government spokesperson. "The deficit is separate; we must have all the additional resources to be able to face the economic situation, and that is why it is fundamental to continue demanding from the State to be able to support citizens and companies in the current context."

Regional governments will receive formal notification of this relaxation in the deficit reference rates most likely this Wednesday, during the Fiscal and Financial Policy Council, which was scheduled to discuss aspects of regional financing.

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