28/07/2021

State budgets and negotiating table, a two-way negotiation

2 min
The Minister of Economy of the Generalitat, Jaume Giró

Of course, there is no need to thank the Treasury for the figures announced on Wednesday. It is money from taxes that should be collected directly by the Generalitat de Catalunya, which, moreover, as is well known, suffers a historic fiscal deficit. But this does not detract from the fact that what happened at the Fiscal and Financial Policy Council (FFPC) is, in general terms, positive for the country and, more specifically, for Catalan finances. The moderate satisfaction expressed by the Catalan Minister of Economy, Jaume Giró, who, moreover, attended the meeting -something that had not happened for some time with his predecessors- must be understood in this sense. And it must be contextualised within the framework of bridges being rebuilt between the Catalan and Spanish governments, with a Bilateral Commission coming up soon to continue dealing with economic issues and competencies (this, by the way, for the moment lacks both an agenda and agreed priorities). The fact, on the other hand, that this Thursday Catalan president Pere Aragonès did not attend the conference of regional presidents is also part of this negotiating balance, with the political dialogue table which is to take place in September on the horizon. The Catalan government is looking for concrete gains without lowering its goals to the dispute over sovereignty. Aragonès and Giró have split the roles.

In any case, the tangible results of the FFPC are that the Catalan budgets will receive €21bn, 6.8% more than the previous year. The average regional increase is 6% and Catalonia is the sixth most benefited, behind La Rioja (8%), Cantabria (7.8%), the Canary Islands (7.3%), Extremadura (7.1%) and Galicia (6.9%). In addition, regions will not have to return negative liquidations of previous years: in this case, for Catalonia the negative liquidation was particularly significant: €1bn which now will no longer have to be returned. In the previous crisis in 2008, none of the debt was written off. Instead, regional governments were given 20 years to pay it back, meaning the Generalitat is still carrying the burden. The third positive point has to do with pending 2017 VAT, which has also been condoned through an extra item in an advance of the state budget. In Catalonia, this mounts to €458m.

On the negative side, the extra covid funds will not be calculated according to GDP, as requested by Catalonia and as would be logical if the goal is for a new economic impetus. The calculation will be made by population, and this will mean that of the €13bn initially planned, Catalonia will receive €2.2bn, 16.6% of the total. And in the chapter of bad news there is also the fact that the deficit margin for the autonomous regions has been left at 0.6%, when the Government was asking for 1.1%, which seems unrealistic due to the evolution of the pandemic, a less rapid economic recovery than expected and the foreseeable social crisis that will emerge next year once the different policies that have served as a social shield, from the furlough scheme to the stay on evictions, are no longer effective. Socially, 2022 could be a complicated year and a wider deficit margin would allow a better response to citizens' needs.

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