Tuesday, July 31, 2012

Spanish government vs Spanish regions: Episode 98,640 (and counting)

Fresh skirmishes between the Spanish government and some Spanish regions have taken place this afternoon, both ahead and during the meeting of the so-called Fiscal and Financial Policy Council - a forum for the Spanish Treasury Minister Cristóbal Montoro (pictured) to meet his regional counterparts.

The meeting is currently still under way, and the main item on the agenda is the 1.5% of GDP deficit target that Spanish regions will have to meet by the end of the year. As we argued in our recent briefing, the target seems unattainable for at least seven of Spain's 17 Comunidades Autónomas - which are expected to make cuts worth over 2.5% of their GDP.

Despite recently having its deficit targets relaxed by the European Commission, the Spanish government has refused to do the same for its regions. Reports in the Spanish press widely suggested that today's meeting was simply going to confirm that all regions will have to cut their deficits to 1.5% of GDP by the end of the year - even if this involves making additional budget cuts.

The government's decision has not gone down well with certain regions - to put it mildly. Thus, Catalonia this morning decided that it would boycott the meeting altogether. In the words of the Catalan government spokesman, Francesc Homs,
There's no point attending a meeting when everything has already been decided before.
Fair enough. But quite controversial, given that Catalonia is one of the three Spanish regions which have already declared that they will ask the central government for a bailout. Furthermore, Catalonia's minority government, led by nationalist Convergència i Unió party, is only able to govern with external support from Spanish Prime Minister Mariano Rajoy's Partido Popular.

And there is more. Andalusia - Spain's most populous region along with Catalonia - did go to the meeting with Mr Montoro, but abandoned the 'negotiating' table in protest against the government's decision to leave the 2012 deficit target for regions unchanged.

As we have argued here, regions will not make or break Spain financially. However, the latest events are yet another indication of how the clear difficulties in reining in spending at the regional level can undermine the Spanish government's credibility vis-à-vis its eurozone partners and the European Commission.

P.S.: Not really a regional issue, but still related to Madrid's credibility. The Spanish government was due to send its budgetary plans for 2013-14 to Brussels by the end of today, but has failed to do so. Perhaps not the biggest of deals, but the deadline was part of the agreement under which Spain was given an extra year to bring its deficit below 3% of GDP.  


5 comments:

Rik said...

Miniature Europe.
Don't want outside interference and don't want to live within its means.
The reasons that PIIGS get away with it and here probably the regions (they have been getting away with it for a couple of years now at least) is imho simply the fact that they can.
There are no sanctions.

Apparently first one of them has to be used es an example. Greece is probably a good candidate and likely will go anyway.
Seen this however I would let the EZ demands do it on a region. Spain is covered internally, you get the example, fall out problems as small as possible. Providing Greece doesnot go first of course.

Rik said...

Have a look at this.

http://emma-col-cat.blogspot.com.es/2012/07/whats-really-going-on-in-catalonia.html

Everybody has forgotten (including myself) that Catalan are also national taxpayers (and they are the Bavaria of Spain).

Although what ever way you look at it their own austerity programm doesnot appear to be very successful.

Another point that this is likely putting fuel on the independency wish in Catalunya. Being a substantial nett contributor to the national treasury while at the same time facing cuts by the same doesnot go well together in times of austerity.

Earlier I had the idea to further regionalise countries like Italy and Spain. With much more budgetrights and obligations. Could be the closest to an optimal monetary union possible. Within these countries you donot have language problems and as much educationproblems as within the EU/EZ.
So when a region does badly, you have less budget (and likely lower social security and lower wages as well). People will move to regions that work (like Catalunya or North of Italy).

FTAV had a interesting topic on the regions with amounts btw.

Anonymous said...

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ESTO VIENE DE LEJOS. LO QUE HA HECHO LA PROFUNDIDAD DE LA CRISIS EN ESPAÑA ES DESTAPAR DE MANERA UN TANTO DRAMÁTICA ERRORES FUNDAMENTALES EN LA ESTRUCTURACIÓN DEL LLAMADO ESTADO AUTONÓMICO. LO QUE LATE DESDE HACE MUCHO TIEMPO EN ESPAÑA ES UNA INADECUACIÓN DE LA CONSTITUCIÓN POLÍTICA Y DEL SISTEMA DE REPRESENTACIÓN CON LA SOCIEDAD VERDADERAMENTE EXISTENTE. Y LA CORRUPCIÓN, QUE LO CUBRE TODO, COMO LA NIEBLA.
http://recortesdeprensa001.blogspot.com/

Anonymous said...

el reñidero español; las comunidades autónomas reinos de taifas; país de panderetas; país de ladrones y tontos.....

here said...

I just read this article and surprised to know that there are skirmishes within Spain and the controversies following it. The current scenario being very unfavourable, I think they must settle down with some option to set the market and economy straight.
here