Central government is only administration that spends more now than in 2010

Barcelona"Montoro blames autonomous communities for deficit deviation". "Regional sinkhole worries IMF". “Spain’s regional government’s, once again suspect". "European Commission insists that Spain must increase control over regional deficit". All of these headlines have been published in the past few weeks, and would lead anyone who read them to conclude that, in effect, the blame for Spain having failed to comply with the deficit target for 2015 can be laid at the feet of the autonomous communities. But the truth is more complicated.

In actual fact, the State is the only administration that spends more today than in 2010, when the austerity policies began. This is shown by the data recently published by the General State Controller (IGAE).

The argument that the central government has repeatedly employed to reserve for itself the vast majority of the deficit margin authorized by the European Commission is that it is responsible for paying pensions and unemployment benefits, which are very sensitive matters. This could explain, for example, why Spain’s Social Security spent €156 billion last year, 3.3% more than in 2010. But if Social Security is excluded, spending by the Central Administration also rose. Specifically, the State spent close to 110 billion euros in 2015, 5.4% more than five years earlier.

In contrast, in this same period all of the autonomous communities together have cut their spending by 13.4%, to a current total of 150 billion euros. In addition, when the State argues that its spending is more sensitive because it affects pensions and unemployment, the communities reply that they have to cover the cost of services such as healthcare and education, which are also highly sensitive and which represent the bulk of their spending. Indeed, in the case of the Catalan Generalitat, social policies (education, health, and welfare) account for around 70% of its spending.

Finally, local authorities (a category that includes municipal and county councils) have cut their spending by 21% between 2010 and 2015, down to 51 billion euros.

A third of the objective

The data published by the State, therefore, contradict what Cristóbal Montoro, Spain’s Finance Minister, stated publicly last month. While presenting the data for the 2015 final deficit figures, Montoro claimed that the central government and local authorities had “more than met" the deficit objectives, and that blame for the deviation rested with the autonomous communities.

Montoro´s justification for this remark was that the communities had been given a deficit target of 0.7% and they exceeded it, with a final figure of 1.6% on average. However, this deficit target was set unilaterally by the central government, ignoring complaints from the autonomous communities and the recommendations of Airef, the government agency that oversees public finances in Spain. The president of this body, José Luis Escrivá, had already warned that the targets set for the regions were "very demanding". "It´s evident that Catalonia cannot comply", the agency admitted last July, as ARA reported at the time.

One almost historic complaint of Andreu Mas-Colell, former Catalan Finance Minister, was that the communities should have had a deficit limit equivalent to one third of the total authorized for Spain, as the autonomous communities are responsible for a third of public spending. Following this line of reasoning, if the deficit allowed by Brussels in 2015 was 4.2%, then regional governments should have had a target of 1.4% They would still have failed to comply, but only narrowly.

Spain’s Finance Ministry has always rejected this claim, whether demanded by Mas-Colell or by, more recently, his successor Oriol Junqueras. Finance has never explained the criteria it followed to determine the deficit targets for each administration. In any case, Mas-Colell and Junqueras are not alone. Last Sunday the regional president of Castilla y León, Juan Vicente Herrera (a PP member), in an article in ´El Mundo´, called for the Spanish government to grant the communities one third of the overall deficit allowed.