Pedro Sánchez on Thursday bid farewell to his closest and most loyal collaborator since he arrived at Moncloa in June 2018. Since then, María Jesús Montero has continuously held the Finance portfolio, one of the most sensitive in any government, and from there she has climbed positions to become, in December 2023, the first vice-president, i.e., number two in the executive. Undoubtedly, Sánchez is giving up one of the pillars of his government to send her to compete in Andalusia against Juanma Moreno Bonilla, a mission that currently seems impossible. It is true, however, that in politics, this month and a half remaining until the elections is an eternity.

The People's Party (PP) is missing a key piece in its solution plan for Catalonia: funding. Although it knows that without Catalonia's support, reaching the Moncloa Palace (the Spanish Prime Minister's residence) becomes much more difficult, it often plays on anti-Catalan sentiment, which benefits it abroad. That regional funding is an uncomfortable issue for the party led by Alberto Núñez Feijóo was made clear this week during the speech by the PP's Deputy Secretary for Economy, Alberto Nadal, at a luncheon organized by Pimec (the Small and Medium-Sized Enterprises Association). Following the presentation by Pimec President Antoni Cañete and his subsequent remarks, when Nadal was asked about Catalonia's fiscal deficit, which, according to 2022 data published by the government, ranges between 8.2% and 5.2% of GDP, he offered no answers. He argued that each autonomous community has its own interests and, therefore, should establish expert committees to determine their needs and then share them. Together, he said, they would be able to reform the model, conveniently ignoring the fact that the reforms implemented so far have always originated in Catalonia. Little else. He didn't quite convince the audience of an organization that had signed a document with seven other business and economic organizations demanding improvements to the Spanish government's funding proposal, the so-called G-8. The attendees applauded when Nadal pledged to lower taxes, deregulate, and repeal certain environmental and labor laws if he were to come to power in Spain. But on the issue of funding, the proposed solutions fell short.

It is not common for the country's main economic and business players to agree and adopt a common position on such a politically poisoned issue as regional financing, but This is exactly what has happened The statement, signed by all the chambers of commerce, the Círculo de Economía (Circle of Economy), Barcelona Global, Fomento, Pimec, the RACC, Fira de Barcelona, ​​the College of Economists, and FemCat, highlights the effort involved in conducting a joint analysis of the situation and reaching conclusions. Political parties should take note of this, because ambitious goals can only be achieved by forging broad consensus. And what does the statement say about the funding proposal put forward by the Spanish government after reaching an agreement with ERC? It states that it is "a significant improvement over the current model" but that it "cannot be considered sufficient." Therefore, it calls on Catalan parties to "work together" to improve certain aspects and safeguard others already included in the proposal.

The more one delves into the data of the new financing system put forward by the Spanish government, the more one sees the number of variables that had to be incorporated. The goal of the ERC (Republican Left of Catalonia) was to be able to claim that Catalonia would benefit considerably, and the goal of Vice President María Jesús Montero was to present it as a more equitable model than the previous one, since this is the banner of southern socialists like herself. Looking at the numbers, it seems that the seemingly unsolvable puzzle has been successfully solved. Undoubtedly, the new system benefits Catalonia much more than the previous one, while also being more equitable, that is, more effectively guaranteeing equality for all Spaniards in access to public services such as health and education. The challenge here is to find a way for a resident of a neighborhood like La Mina in Sant Adrià to have access to the same resources as someone from the Las Trescientas neighborhood in Cáceres, something that is not currently the case. Based on the 2022 settlement figures, Extremadura had €4,018 per capita and Catalonia €3,264 to pay for exactly the same services. Therefore, the current model does not generate equality but inequality. Specifically, it penalizes the poor population in territories that, on paper, are wealthy, such as Catalonia. Therefore, the new system is more equitable because it focuses more on real people and less on territories. And as former president José Montilla once said, there are more poor people in Catalonia than Extremadura has inhabitants.

"At Cecot, we welcome the government's proposal, but we cannot confuse this step forward with a definitive solution: it is not a special economic agreement, nor does it come close to the figures that Catalonia requires." This was the assessment of Xavier Panés, president of the employers' association Cecot, regarding the new financing model for Catalonia, during the association's traditional press conference held at the beginning of the year. In this regard, the organization welcomes the new financing model as a "step forward" in addressing Catalonia's fiscal deficit, but regrets that it is insufficient and, therefore, will not be the definitive solution to the region's "structural problem."

It seems unheard of, but the president of the PP, Alberto Núñez Feijóo, has called a meeting this Sunday with his party members. males to force them to sign a declaration in which they all pledge not to accept the new money that the new financing system would mean for their autonomous communities. For the Popular Party, the system is "unfair" and a "rigged deal" simply because it was agreed upon by a party like ERC, as if this hadn't happened in all previous systems, for example, the 1996 system, which resulted from an agreement between the PP and CiU. The fact is that a citizen of Valencia or the Balearic Islands, which have PP governments, watches in astonishment as their administrations renounce a huge amount of resources, which would undoubtedly improve public services in their territories, simply because it doesn't suit Feijóo's political strategy. The signing today of the so-called Zaragoza Declaration by Marga Prohens and Juanfran Pérez Llorca goes against the interests of their citizens, and even against the mandate with which they were elected, which is to strive to improve the living conditions of their people. Or does Pérez Llorca think that Feijóo will improve upon the offer of 3.669 billion euros made by Pedro Sánchez's government? And what guarantees does he have? Isabel Díaz Ayuso can afford to forgo that money because the capital effect more than compensates for her underfunding, but other regions cannot.

The spectacle of Wednesday's Fiscal and Financial Policy Council meeting, where Vice President and Finance Minister María Jesús Montero presented the proposed new financing system to her regional counterparts, can only be described as lamentable. Never before has a Spanish government put so much money on the table to transfer to the Autonomous Communities. And yet, the PP-governed regions have rushed to reject the system with the sole argument that it was agreed upon with Catalonia, and specifically with ERC. Anti-Catalan sentiment remains such a significant driver of the conservative vote that the PP is willing to go so far as to renounce a substantial amount of money simply because it considers it "tainted" by separatism, thereby harming its own citizens.

For many years, the autonomous communities knew exactly how much money they would have to prepare their budgets for the following year thanks to a figure written inside an envelope given to the Secretary of Economy before the summer. Literally. This was done at the end of the meeting of the Fiscal and Financial Policy Council held in Madrid, where the Spanish government holds the deciding vote, dominating any decision. The communities under the common regime accepted this, while the chartered communities remained observers with voice but no vote, because they didn't need to. Incredibly, a white envelope containing a mysterious figure was handed out, announcing how much of the money collected in Catalonia would be transferred to the central government for spending in Catalonia. Spending on what? On community responsibilities, basically public services such as healthcare, education, social services, and security. This is how the system works: controlling tax collection and transferring funds according to the whims of the central government's interests through an opaque and arbitrary system that could never be predicted with certainty. In 2008, Cristóbal Montoro took advantage of the debt crisis to push Catalonia to the brink of bankruptcy and blackmail it by threatening to withhold the salaries of hundreds of thousands of public employees. Chronically underfunded, the Generalitat (Catalan government) had been forced to go to the markets and borrow to provide services. When the markets closed due to the crisis, Montoro saw an opportunity to tighten spending and stifle management. The 2008 crisis not only shook the Catalan economy; it structurally altered the financial relationship between the Generalitat and the Spanish State. In this context of falling revenues and virtually impossible access to the markets, the Spanish government created the Regional Liquidity Fund (FLA), a mechanism initially conceived as a way to rescue liquidity so that the autonomous communities could pay their debts and suppliers. But the political translation of that decision is clear: when an autonomous community cannot finance itself normally, it becomes dependent on the State for funds.

The regional financing agreement was signed by the PSOE, a party in crisis, and ERC, a party recovering (at least). Interestingly, sometimes a sum of weaknesses yields better results than a sum of strengths. It is not generosity, but necessity, that has allowed them to agree on a series of things that, just a year ago, Minister Montero considered impossible and unconstitutional. Ordinality ad hoc For Catalonia, the extra contribution from the State so that what some gain doesn't cost others, the oxymoron of plural singularity... and what ERC still hopes to obtain: comprehensive management of personal income tax and an investment consortium that retains in Catalonia all the funds not spent in the budget. It's a promising list, but it falls short of what the PSC agreed to in order to secure the votes to invest Isla, and furthermore, the path now beginning will be a true ordeal: Pedro Sánchez will have to defend that agreement against Junts, perhaps against Podemos, against the PP and Vox, against his own party. malesAnd it will do so without María Jesús Montero, offered up as a sacrifice on the altar of the Andalusian elections. We'll see what's left of it all. The clock is ticking.

The financing agreement between the Spanish government and ERC, signed on Thursday by Pedro Sánchez and Oriol Junqueras, and presented this Friday by the Minister of Finance, María Jesús Montero, represents a step forward, a significant reform of the current and outdated model, which had clearly proven detrimental to Catalonia. Reforming the system substantially was not easy. It has been done, and some taboos have begun to be broken, for example, the taboo of ordinality. Of course, anti-Catalan demagoguery is once again making noise, but that's all it is: demagoguery. With the numbers and the details in hand, Catalonia is by no means lacking in solidarity. Nor, conversely, is it so far removed from the progressive collection of taxes; in fact, the goal of the agreement is to move towards 100% of personal income tax revenue and close to 80% of VAT.

It is clear – as Oriol Junqueras likes to say – that the proposed new financing model does not give Catalonia the key to its coffers: there will be no special economic agreement nor a unique model separate from the other autonomous communities. But it is also clear that it will bring more resources to the Generalitat's coffers: according to the Ministry of Finance's calculations, almost 4.7 billion euros in 2027. From these two facts, we enter the realm of opinions, where politicians choose sides to try to dismantle their rival's arguments.

More resources and greater participation of the autonomous communities in key taxes such as personal income tax (IRPF) and VAT are two of the main pillars of the proposed financing model for the autonomous communities under the common regime (which includes all communities except the Basque Country and Navarre, the chartered communities), presented this Friday by the First Vice President and Minister of Finance, María Jesús Montero. The proposal involves updating the current system and comes after an agreement with ERCAnd, incidentally, with the Generalitat – in exchange for supporting Salvador Illa as president, an agreement was reached with the Republicans to implement a new model that would take into account Catalonia's "uniqueness." The proposal aims to move beyond the current model, designed in 2009 and awaiting updating since 2014. Montero acknowledged that this is one of the "most complex" challenges of the legislature and immediately urged against falling into the trap of "territorial favoritism." The Treasury has clearly always worked to ensure that, despite the negotiations with ERC, where they are satisfied with the outcome, the proposal is not interpreted as a model tailor-made for Catalonia. "There is no single model for every autonomous community," the Finance Minister asserted.

Most of the New Year's Eve speeches by regional presidents have had two main common denominators: housing and financing. In the first case, they have boasted about the measures they have implemented to address the primary concern of Spaniards. And in the second, they have criticized the proposed future model of regional financing. ERC and the PSOE are finalizingOne of the most significant voices has been that of Emiliano García-Page, the baron The socialist most critical of Pedro Sánchez. He has not uttered the words financing neither CataloniaBut everything was understood when he warned that he would stand up to it: "We will fight any kind of attempt at privileges that harm us."

Catalan politics, and partly Spanish politics, is in the hands of an Andalusian politician named María Jesús Montero. In the coming weeks, she is expected to present a proposal for regional financing that will determine the future of the Catalan and Spanish legislatures.

This Monday saw the launch of the unique financing project championed by the ERC (Republican Workers' Party) and accepted by the PSOE (Spanish Socialist Workers' Party) within the framework of Salvador Illa's investiture as president of the Generalitat (Catalan Government). The text agreed upon and signed by both parties is full of good intentions, always qualified by the call for the extensibility of the agreement to other regional tax administrations. The objective is for the tax administration of the Generalitat to progressively assume responsibility for managing personal income tax and for personal income tax returns for the 2025 fiscal year to be submitted to the Catalan Tax Agency (ATC), with the possibility of using the digital identification key established by the Generalitat (idCAT), and for the AEAT to be able to make progress, particularly with the verification of the correct application of regional regulations and, in particular, of the deductions approved by Parliament."

Today's financing situation is more difficult than the attempt at amnesty. Because we're talking about money. What's more, we're talking about the money of the Catalans, which finances part of the well-being of Spaniards in other regions.

If there is a pandora box in government, it is taxation. In the Spanish case, it has not been opened for years, or at least not completely. Now, however, the executive, and specifically the Ministry of Finance, has two commitments on the table that change the situation: tax reform, on the one hand, and a new regional financing model, on the other. Although the two issues are far from being closed, they are part of the Spanish government's to-do list for fiscal matters for 2022.

The unexpected intervention of former Catalan president Jordi Pujol at an event organised by ARA, in which four Catalan finance ministers spoke about the underfinancing of Catalonia, have brought back to the table the debate on whether the Generalitat missed the opportunity to demand its own taxation system during the Transition. Beyond the responsibility of this or that political representative or the veracity of the Spanish government's alleged offer, the fact is that the independent taxation was not on the Catalan nationalist agenda at the time. In the minds of the Catalan politicians of the time, there were other priorities, such as, for example, putting self-government on the fast track and obtaining tools to be able to protect the Catalan language. Few people, with the exception of Trias Fargas, had seriously studied the question of financing.

The Spanish government says it has given autonomous regions economic oxygen after the Fiscal and Financial Policy Council (FFPC) met on Wednesday. The Ministry of Finance has informed regions they will receive €112.2bn in advance funding for 2022, a 6.3% increase on the previous year. Of this amount, ARA has learnt, Catalonia will receive €21bn, an 6.8% increase on 2021.