Financing: Now is the time, but the clock has stopped.

BarcelonaThe time to move forward with the agreement on financing that will allow Catalonia to collect all its taxes is approaching. It was an essential element for the investiture of President Salvador Illa, but the political situation, with the corruption scandal affecting the PSOE, is complicating matters. And although work to implement the model was at an advanced stage, the June 30th deadline is moving further away, several sources consulted admit. The challenge now is, if the legislature holds out, to present the image that work on the new financing model continues. The time has come, but the clock has stopped.

And, in this context, the former President of the Generalitat and Minister of Economy, Pere Aragonès, warned this Friday of the need to take advantage of the existing balance of political forces to make a leap forward. "We are facing an exceptional political situation, with a lot of noise, but one that makes it possible to take a significant step forward in financing. We don't know when we will once again have a balance of power like the one we have today," he warned during his speech at a panel of former Economy and Business Ministers at the Fourth Congress of Economy and Business of Catalonia, being held in Barcelona. It was supposed to be closed by President Salvador Illa, but it was canceled because he was due to meet with the Spanish Prime Minister, Pedro Sánchez, at the Moncloa Palace.

According to Aragonès, "those on the front lines have a great opportunity and deserve our support" because Catalonia, he added, requires "fair financing." The proposal agreed between the PSC and ERC provides, in addition to the collection of all taxes, starting with personal income tax next year, to pay the State for centralized services, such as embassies and defense; and to establish a percentage of solidarity with other territories.

At the table of former councilors, they were not asked about the issue, but it has arisen directly or indirectly. Jaume Giró, who held the position for Junts in coalition with ERC with Aragonès as president, highlighted that the current financing model, outdated since 2014, "subtracts resources generated in Catalonia": "That's 22 billion euros that go away every year and don't come back." He compared it to the eucalyptus tree, which constantly sucks up water and everything around it: "The current financing model isn't a spoke in the wheel, it's a log." He added that it was an issue that "cannot be ignored when talking about the competitiveness of the Catalan economy."

Pending Productivity

Also participating in the meeting were Natàlia Mas (ERC) who replaced Giró in the post once Junts left the government, and Antoni Castells (PSC), who held the portfolio during the tripartite government. Oriol Junqueras, who was also Vice President and Minister of Economy, was invited but was unable to attend due to illness. They were preceded by the current head of the portfolio, Alícia Romero, who simply highlighted "the good economic situation" Catalonia is experiencing, with gross domestic product (GDP) growth of 3.4% in the first quarter of the current year. Without mentioning the financing model, she acknowledged that there are outstanding issues, such as more inclusive growth, which requires boosting productivity, although this variable has improved in recent years, according to Mas.

And this, that of productivity, is one of the most prominent issues during this session, and also for some of the former Economy Ministers. Mas insisted on the importance of investing in industry as a driving force given its positive externalities and recalled the pact for industry promoted by the government of which he was a member.

For Castells, who despite being a member of the expert council for financing has not referred to it, we suffer from the problem from a double perspective: the European one, as the reports by Mario Draghi and Enrico Letta warn, compared to the US and China; and our own, because in Catalonia, which is above the Spanish average, "between 1998 and 2018, GDP per capita is where it was and currently the Baltic countries surpass us." Giró, for his part, championed competitiveness more than productivity and highlighted problems affecting businesses, such as bureaucracy, taxation, and absenteeism.

This fourth conference organized by the College of Economists of Catalonia focuses on digitalization and sustainability. The previous conferences took place in different contexts. At the first, in 1979, Spain had just recovered its democracy and was experiencing a deep economic crisis. At the second, in 1988, the country had recently joined what was then the European Economic Community. And at the third, in 2018, the effects of the Great Recession of 2008 were still being felt in a Catalonia immersed in the Economic Process.