After the electoral result, the acting president of the Generalitat, Artur Mas , -if he obtains the necessary support to be reinvested in December with only 50 deputies and without having reached an absolute majority (68) – he will have to face a marked legislature in economic terms, essentially due to the payment obligations that the Generalitat has with its creditors.
Or what is the same, the Generalitat needs to pay investors who in the last year have bought Catalan debt in the markets to allow financing and investment in health, schools and social spending and the payment of invoices to suppliers and the payroll of the officials.
This financial priority will be conditioned by the political pacts that the current president seeks with the opposition parties that can give him or not support in the next term.
Apart from the sovereignty debate, the day-to-day reality of the governability of the Generalitat will have a marked economic accent in the tenth legislature that will depend on what can be resolved by the pacts sought by the winning candidate of the elections, in this case CiU , that will be able to govern alone or with the punctual or habitual support of the main groups of the opposition: ERC, PSC and the Popular Party. Although as the negotiations are developing the stable agreement with PSC and the Catalan PP seems further away.
Given this situation, the macroeconomic numbers are not good for Catalonia. The Generalitat faces the new legislature with 43.9 billion public debt and debt maturities whose total can reach the 6,000 million euros that must be paid throughout 2013 and can not afford as an autonomous community that goes to finance in the markets with its current rating, where investors let themselves be guided to invest in the rating notes they receive and where Catalonia’s debt is classified as a “junk bond”.
The need to pay 6,000 million euros over the next year (around 2,300 million correspond to interest) will be the main concern of the new Catalan government. But what are the economic proposals that they carried in their electoral programs ERC , PSC and PP and how can they condition the policy carried out by Artur Mas?
Can the economic programs solve the serious economic crisis suffered by Catalonia with 800,000 people without work and with the need to implement austerity policies with new spending cuts amounting to 4,000 million with the aim of reducing the public deficit in order to access the financing in the markets?
If we analyze in depth the economic programs of the three main opposition parties (ERC: 21 deputies, PSC 20 and PP 19) clear differences are observed between the proposals of the independence, which advocate the creation of more taxes and even increase the public deficit of the Generalitat to increase social spending and socialist and popular.
The socialists, in general terms, defend the deficit control but maintaining the policies of social spending and those of the people who defend the reduction of fiscal pressure, the maintenance of social spending in Education and Health and comply strictly with the demands of reduction of the public deficit.
This panorama foresees that the negotiations for the CiU government pact with the three opposition parties will be complicated since the economic programs are, in general, very different in their proposals.
According to sources familiar with the conversations, Convergència i Unió (CiU) would have offered the vice presidency of the Generalitat to Esquerra Republicana de Catalunya (ERC) to enter the next Government of Artur Mas.
In return, Acting President Artur Mas is committed to rethink the recovery of Inheritance Tax and even to study the elimination of pharmaceutical copayment, among other issues. For its part, ERC has rejected the offer to enter the Govern although it has offered support to the investiture of Artur Mas, to the budgets and demands a timetable for the convolution of a independence referendum.
In this context, Oriol Junqueras , candidate for the presidency of the Generalitat by ERC, puts as a condition to give a turn to economic policy and not to comply with the reduction of the deficit imposed by cuts and adjustments of austerity, contrary to what international investors ask as a condition to buy Catalan debt and finance this autonomous community.
ERC wants to tax the financial sector more with the creation of two tax figures that would generate, according to their calculations, an income of 595 million euros per year: a new tax on bank deposits and the use of public roads of ATMs They dispense cash and allow operations to citizens. This last tax has already been proposed by the nationalist mayor of Barcelona, Xavier Trias (CiU).
This tax on bank deposits would be the main source of income of the tax increases proposed by Oriol Junqueras’ party in its package of economic requirements for CiU. They foresee that only about 500 million euros could be obtained from this rate.
Most of the tax increases proposed by ERC should contribute, in total, to the Catalan public coffers about 1,000 million collection, which would reduce by 25% the 4,000 million new cuts that the Generalitat is proposing for next year 2013 .
Esquerra, which openly supports the inauguration of Artur Mas as the new Catalan president, although he refuses to join the Government, which has said that next year it will have to apply adjustments to the 2013 budget amounting to 4,000 million euros. Inheritance tax that was lowered during the Catalan tripartite government (PSC, ERC and ICV) and that allowed to raise the collection for this tax that CiU reduced to a minimum imposition two years ago at around 300 million euros per year.
The party led by Oriol Junqueras includes in its electoral program the reduction of 56% to 50% of the marginal rate of IRPF for the highest incomes, a reduction that would be applied progressively. Artur Mas said in the last legislature that it would only lower taxes when Catalonia grows in terms of Gross Domestic Product (GDP), a situation that is not current since Catalonia is immersed in recession and does not generate enough wealth to finance its pending payments.
ERC accepts (although with conditions to revise it upwards and not comply with it) respect the deficit limit set for Catalonia for 2013, of 0.7% of GDP, but requires CiU to raise taxes to banks and large companies, according to sources familiar with the conversations between republicans and converging to guarantee the viability of the new Government.
This means that ERC would be co-responsible for part of the cuts that will have to be made in the next Generalitat Budget, although its demands would also imply important tax increases for banks, companies such as large stores and also nuclear plants installed in Catalonia. , which would affect the Vandellós complex (Tarragona), owned by Iberdrola and Endesa.
Another of the economic proposals of ERC is that the minimum exempt of the Wealth Tax is reduced from the current 700,000 euros to only 500,000 euros. Its impact is estimated at around 100 million euros for each year as of 2013.
The independence formation also wants to propose the application of the bank form for the investment body of the Generalitat, the Institut Català de Finances (ICF), so that the regional credit agency can go to the markets to seek financing as the ICO already does, the state financing entity with the objective, according to Esquerra, of reducing the annual contribution made by the Generalitat.
In the same way, they also propose raising the tax burden to high incomes: applying a progressive relief for housing in the autonomous section of the IRPF, recovering the Inheritance Tax and increasing Patrimony.
In the opinion of CiU, this proposal would mean rectifying all of its fiscal policy in the Generalitat of the last two years. That is why, for now, he rejects them. The advantage, according to ERC, is that they would be co-responsible, always from outside the Government but giving parliamentary support, of cuts amounting to 4,000 million euros throughout 2013.
They would also assume their dependence on the Autonomous Liquidity Fund (FLA) and the conditionalities that will be applied by the Minister of Finance, Cristóbal Montoro. The Ministry of Finance conditions the FLA so that the communities that benefit from it meet the deficit target. That is to say, that its approach is either Esquerra or FLA, unless Junqueras accepts to lower it in 2013 to 0.7% of GDP.
The latter displeases the bases of the pro-independence party, but the leading cadres assume that with the closed sub-sovereign debt markets there is no other alternative to keep the Catalan Administration going, which involves a debt of around 48,000 million, a figure that has been increased in the last three legislatures since the last government of Jordi Pujol passing through the two legislatures of tripartite governments until now.
Great social anti-crisis agreement of the PSC
For its part, the PSC proposes in its economic program the convening of a ‘summit’ on the economic crisis in which political parties, trade unions and businessmen participate.
The socialists of Catalonia have presented proposals that are closer to nationalism led by CiU than modern social democracy, the classical left or the PSOE itself, even in its current situation of internal crisis.
In the 114 pages of the electoral program, the PSC proposes a constitutional reform and a set of economic measures that must be approved in the Congress of Deputies. The reform of the Constitution would include a tax reform giving powers to the Tax Agency of Catalonia to increase the regulatory management capacity of taxes paid in Catalonia.
The socialist candidate Pere Navarro has proposed, in line with what European socialist leaders such as French President François Hollande advocate, to move towards a political and fiscal union and create Eurobonds to facilitate the financing of the member countries of the European Union, as well as the Labor and energy market reform.
The PSC has proposed in its program to present a large “strategic agreement for economic reactivation and occupation”, to monitor companies presenting an Employment Regulation File (ERE), a plan to reduce youth unemployment; and strengthen the industrial base through fiscal stimulus and public investment policies.
Socialists propose measures of fiscal stimulus for entrepreneurs and, in the first two years, they are exempt from the payment of taxes arising from the creation of a new company and reduce the Social Security quota to 50% of workers hired .
The PSC will integrate “functionally the human teams”, in case of putting into practice its electoral program, the Catalan Institute of Finance and Acc1ó.
The PSC, in the line of proposals on energy issues and that do not depend on the Parliament, has proposed the closure of Acó and Vandellós reactors, in Tarragona.
The socialists also defend strengthening agrarian producers with a new framework of cooperativism to try to consolidate the Catalan agro-industry and a moratorium and reform of the tourist tax that was approved by CiU and that can suppose a point of disagreement with a hypothetical government pact with Artur Mas.
In the aspect related to taxation, the PSC has placed itself on the path of social democracy. The program does stipulate that more people who pay more income per year should pay more and, in this line, they have promised that they will promote a tax for large fortunes, another for the benefits of financial institutions and hope that Congress will modify the SICAV.
In addition, in the text presented to the public, has included the creation of new taxes, among others, the so-called green and others that affect the foods that have an incidence on obesity and cardiovascular diseases, for example.
Navarro’s objectives in terms of social cohesion are summarized in reconstructing the public health service by eliminating the euro by prescription imposed by CiU, adapting the Law of Dependency, guaranteeing a minimum basic income for people in poverty, reinforcing policies of equality between men and women, helping the younger sector so that they can have opportunities and get out of the crisis as soon as possible and, finally, make the Third Sector an essential tool for the public sector.
The proposals of the Catalan PP
The Catalan PP, led by Alicia Sánchez-Camacho , proposes in its economic program with which it has attended the Catalan elections of November 25 last.
The Catalan PP advocates applying the additional resources generated by the new financing model to cover basic policies of the welfare state, policies to promote economic growth or job creation, and to limit the deficit and reduce the debt of the Generalitat. Balance, stability and austerity is his proposal for the regional accounts.
In the private sector, the popular propose to streamline the processes of creating companies and facilitate financing with a law of entrepreneurs, self-employment and self-employment, as well as implementing measures to support entrepreneurial initiatives. Plans to improve the Employment Service of Catalonia and reindustrialization complete this section.
It also highlights its commitment to enhance scientific culture, increasing resources to stimulate R & D & I, and the promotion of exports, developing plans to support the internationalization of SMEs.
Prioritize the Mediterranean railway corridor
In the field of infrastructures, the prioritization of the Mediterranean railway corridor stands out; the road accesses to the ports of Barcelona and Tarragona; the improvement works of the N-II in the province of Girona; the N-340; the variant of Vallirana, and the A-27 in Tarragona. Other preferred projects are the Vallés metro; line 9 of the Barcelona metro, and airport rail connections.
Facilitate access to housing; improve the system of bonuses of the tolls of the Generalitat; favor the employment of university students; develop a family and cultural tourist model complementary to that of sun and beach; enhance local commerce; develop specific security plans against theft in shops; and to reinforce the support to the city councils to avoid the illegal street vendor, they are other of the proposals collected in the electoral program.
Reduction of the autonomic Administration
From the Catalan PP, raise a reform of the autonomic Administration by means of the approval of an Electoral Law, a Law of Transparency and Good Government, and a Law of Institutional Publicity. As well as the decentralization of powers of the Generalitat towards the city councils.
Among the most relevant points is the proposal to suppress the tourist tax; the reduction in 20% of the number of seats in the autonomous Parliament (going from 135 to 108); the elimination of 782 regional councilors, of 20% of the positions of confidence of the Government, and the reduction of the expense of the offices of the former presidents of the Generalitat; the suppression of companies and public entities that “do not justify the social profitability of the services they provide”, as it appears in the electoral program of the Catalan PP.
It also highlights the proposal to reduce the size of public media. “We will demand that they guarantee plurality and we will oppose the establishment of a new tax or rate for their financing,” they point out.
“We will eliminate the delegations outside of London, Paris, Berlin and New York, we will agree with the Ministry of Foreign Affairs that these services can be provided from the Spanish embassies and consulates, we will abolish the House of the Generalitat in Perpignan and we will evaluate the continuity of the Offices outside the Ramon Llull Institute “, picks up another of the points of the PP’s electoral program.
Weakness of Catalan debt in the markets
The risk measurement agency Fitch considers that Catalonia may need more funds to cover its domestic banking obligations next year, despite the fact that the Government has extended the Autonomous Liquidity Fund (FLA) to 2013.
Fitch has said in a statement that this need will arise if the FLA, the mechanism created by the central executive to meet the liquidity needs of the autonomies, is implemented following the same criteria as in 2012 and the coverage of the loans is excluded from it. domestic banking.
The agency notes that the difficulties to obtain this money in the capital markets, as well as the reluctance of banks to lend money to regional governments, makes it very likely that Catalonia will have to continue requiring liquidity support from the central government to attend obligations.
Fitch also recalls that in the Catalan elections held this past Sunday, the pro-independence formations won a majority, which could strain relations between the central and regional governments and complicate negotiations for this liquidity.
Catalonia was one of the first communities that resorted to the Liquidity Fund to be able to attend to the payment of debt maturities and payments to suppliers. The autonomous community of Catalonia will finally receive 5,370 million euros from the FLA and will pay 300 million in interest on these funds.