In 2012 Catalonia endured a fiscal deficit of €14.623 bn, equivalent to 7.5% of GDP

This figure is lower than previous years, as in 2010 it was 16.543 billion. Catalonia accounts for 18.4% of Spain’s total revenue, but receives only 13.6% of its spending

Roger Tugas
3 min

BarcelonaIn 2012 Catalonia's fiscal deficit stood at 14.623 billion euros, according to calculations made public Friday by Catalonia’s Ministry of Economy, led by Oriol Junqueras. This amount, which represents 7.5% of Catalan GDP, is calculated by the monetary flow method, which takes into account only the resources provided by Catalans and those later received by the region in the form of spending, investments, or services.

The report also reveals that while Catalonia provides 18.4% of total Spanish revenue, it receives only 13.6% of its total expenditures. However, this difference is greater if you consider only discretionary spending that depends on the decisions of the central government; that is, if you exclude social security spending, which depends on the acquired rights of the unemployed, pensioners and other recipients of services --and represents the majority of expenditures received by the Generalitat: €29.282 billion out of €44.616 billion in total. Taking into account this discretionary spending, then, Catalonia receives only 9.2% of Spain’s overall spending.

In fact, in terms of resources from financing, Catalonia only received €2.082 billion in 2012, 6.6% of the total resources of the system. In this regard, the Generalitat laments that, with the current funding system, "regional governments with a significant level of tax revenue receive few transfers or even make contributions to other regions via the State that are chalked up as negative transfers”.

Fiscal deficit fell with respect to prior years

These figures are lower than the Generalitat´s fiscal balances in previous years. Thus, according to estimates by the Ministry, then headed by Andreu Mas-Colell, Catalonia had a fiscal deficit of €15.006 billion in 2011, equivalent to 7.7% of GDP, while in 2010 it was €16.543 billion, or 8.5% of GDP.

This fiscal deficit drop, in fact, can be explained by the fact that, although revenue contributed by Catalonia with respect to the Spanish total grew by 1.8% from 2011 to 2012, the expenditures received grew more: by 2.8%. If social security is excluded and only discretionary spending is taken into account, revenues contributed by the Generalitat grew by 8% with respect to the total, while expenditures increased by 10.4%.

In fact, in absolute terms, the fiscal deficit had not been so low since 2006 —it was 14.493 billion then. In relation to GDP, however, it is necessary to go back to 2001 to find one so low. That year it was equivalent to 6.7% of GDP, but in 2002 it rocketed to 10.1%.

However, the report notes that in perspective, between 1986 and 2012 Catalonia contributed on average 19.4% of total Spanish revenue, while it received 14% of the expenditures. Excluding social security items, Catalan contributions would average 19.6% of the total, while revenue —the discretionary and policy spending by the State— would fall to 11%.

Other calculation methods

According to another method of calculation, the tax-benefit method —which allocates spending depending on who benefits from it, distributing throughout the country, for example, investments in Barajas Airport, the Prado Museum or the Crown—, the fiscal deficit is lower. With this way of computing it, in 2012 Catalonia had a fiscal deficit of 10.030 billion euros, representing 5.1% of Catalan GDP.

In spite of all this, the Generalitat supports the monetary flow model, especially "in times of economic crisis and high unemployment," since this method of calculation "measures the economic impact generated by the activity of the central administration in a territory, and is thus much more significant" since it can provide resources to help create jobs and improve the situation of companies.

However, there are also other ways of calculating the fiscal deficit. In the two models mentioned above, the calculation is made with an assumption of a balanced budget -- as if the total deficit was zero, to avoid the appearance of all communities having a fiscal surplus, as they receive resources from public debt, and that the balanced account is achieved by means of an increase in taxes, "the adjustment hypothesis that is considered most plausible" by the Catalan ministry.

If the balance were done by adjusting expenditures —on the assumption that the imbalance is resolved by drastically reducing spending— the Catalan fiscal deficit would be €12.770 million, or 6.5% of GDP, with the monetary flow method, and €8.759 billion, or 4.5% of GDP, with the tax-benefit method.

Catalan social security, much more balanced

The report also includes a section that specifically analyzes social security revenues and expenditures. Thus, Catalonia had a 2012 deficit of €3.760 billion in this area. The whole of Spain also had a deficit, of €34.080 billion.

And, while Catalans had been net contributors to social security between 1997 and 2008 and only had a deficit in 1995 and 1996 and between 2009 and 2012 —when unemployment was high and, therefore, contributions had fallen and services had grown—, the situation is more delicate for the whole of Spain. Spain has spent more on social security in 11 of the 18 years analyzed and, in addition, at higher percentages in relation to GDP.

The overall figures in this regard are clear: first, between 1995 and 2012 Catalonia contributed to social security €20.336 billion more than it required; and secondly, in the same period Spain as a whole required €116.711 billion more than it collected.

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