We hadn’t witnessed such a clear example of Spanish politics’ historical tendency to commit suicide for a while now. A refusal to talk, threats, upping the ante in each round and seeking victory by suffocating your opponent. One hundred to nil. Captive and disarmed. The problem is that this attempt to bring about Catalonia’s financial asphyxiation is like agent orange being dropped by a suicide pilot.
The Spanish government has decided to completely overwhelm the Catalan administration by demanding weekly reports on its accounts. The measure has several objectives: first off, to terrorize the auditors who are required to testify to the correct use of public spending, under threat of some form of penalty, should they fail to comply. It is also intended to ensure its teams of accountants are unable to process the avalanche of information being sent to Madrid, which has better resources at its disposal than the Catalan administration itself.
The Spanish government is also looking to culminate its takeover of Catalonia’s public finances, which began with the creation of the Autonomous Liquidity Fund [FLA in Spanish] in July 2012. In the midst of the financial crisis, with the debt markets closed to the Catalan government (along with other regional governments), leaving them unable to obtain credit, the Spanish government offered a line of credit subject to accepting a draconian deficit target, the sharing of information and a permanent cap on the Catalan administration’s spending autonomy. The Spanish government initially resorted to costly loans from the debt markets, and subsequently for free thanks to Saint Mario Draghi’s policies as the head of the ECB. It then lent the cash to Catalonia at interest.
How come a Spain on the threshold of bankruptcy was able to obtain money and the €50 billion bailout it needed to save its banking sector? Because it was —and continues to be— in control of its taxation system. Because Spain is responsible for collecting tax revenue and it distributes it in such an arbitrary manner that it has been challenged by every autonomous community, except the Basque Country and Navarre, who collect their own taxes and do not contribute to the interregional solidarity fund. The FLA and the extent to which it can be used to blackmail in such a manner was accompanied by a refusal to renegotiate the regional finance system, which was the last step in the financial takeover. Under the current arrangement, the Spanish government controls the Catalan government’s income through an out-dated system of financing in the form of the FLA. It decides the priority of payments and obtains detailed information concerning its invoices, which it pays directly to the Catalan government’s suppliers. Does this sound like a tax model belonging to a colony, a province or a tobacco plantation?
The current threat is not being able to pay the bills associated with 1-O [the 1 October referendum on independence]. Again, the arbitrariness. Will it be a response to public broadcasters reporting on the vote or running ads encouraging participation in the referendum? Will any IT expenditure be included? Office supplies? What criteria will be applied, aside from political arbitrariness? What is the limit of the Spanish state’s access to the monies collected in Catalonia, where the vast majority is in favour of a referendum?
Spain’s threat of withholding the FLA funds is suicidal. Catalan debt currently stands at €75 billion, of which two thirds are owed to Spain, a little over €50 billion, a debt which is underwritten by the Kingdom of Spain, who would be held responsible if Catalonia were to default. This year Catalonia will receive FLA funds to the value of €7.34 billion, of which €1.324 billion correspond to its authorized deficit (0.6% of GDP), with the rest destined for debt maturity. Every international creditor is aware that the reputations of the Kingdom of Spain and Catalonia are entwined.
BELIEVING THAT THE OTHER GUY’S AN IDIOT
The current impasse in the relations between Spain and Catalonia has its origin in an unfortunate, useless contempt. In some cases, it is mutual, like when Catalonia makes the mistake of underestimating the power of the state, but in general, Catalonia’s popular movement has managed to present a positive project that has no need to denigrate anyone. Displays of contempt are often used by certain commentators who are opposed to the independence process and believe that Catalonia is experiencing a moment of collective alienation which they put down to the demonic manipulative power of a part of the Catalan media.
The most recent example is that of a nostalgic enfant terrible who, in a moment of glory, appears to still believe himself to be the editor of Mundo Obrero [Workers’ World, the periodical of the Spanish Communist Party] and writes pamphlets designed to free the ignorant of the yoke of capitalism and bourgeois nationalism. Mr. Morán, the Catalan people are not manipulated idiots. They simply wish to vote in a referendum. Some even wish to vote ‘no’. Thank you.