Rajoy takes over Catalonia’s finances

The Spanish government will monitor all Generalitat spending as punishment for independence process

The Spanish government has imposed harsh special conditions on Catalonia for loans from the Regional Liquidity Fund (FLA in Spanish), which is a de facto takeover of the Generalitat's finances. As announced on Friday by Spanish Vice-President Soraya Sáenz de Santamaría,  "the unique situation with Catalonia" and the "breach of its obligations", in addition to "statements by its elected leaders", has led the Madrid government to raise its degree of intervention in Catalan finances.

The Spanish government has distributed €7,889 million from the fund surplus, of which Catalonia had requested €2.6 billion, subject to a final assessment by Treasury staff. Finally, after this evaluation, Catalonia will receive €3,034 million from the FLA, but will be subject to these new oversight measures, of which other communities are free: every month the Comptroller General will have to certify that Catalonia is not spending a single euro for illegal ends, and government workers can report the Generalitat if they believe that there has been a violation of the law. That is, not only will the FLA expenditures be monitored, as has been the case, but all other spending will be as well, including all expenses made with income from Catalonia’s own taxes or the sale of assets.

Cristóbal Montoro, Spain’s Finance Minister, had warned that these funds will not go towards financing "pro-independence whims". With the steps announced on Friday, the warning takes on substance, and Montoro is confirmed as President Rajoy's anti-independence spearhead on financial matters. In practice, this means a partial takeover of the Generalitat’s financial autonomy. Nevertheless, Montoro stated that the Spanish government "has not taken over" the accounts of any regions, but merely that "it has established more stringent oversight mechanisms".

Montoro considers that Catalonia represents a "risk for the general interest", for the same reasons given by the vice-president. According to him, there have been statements made by Catalan leaders about non-payment of suppliers and debt. In addition, he reproached the Catalan authorities for the 1.3 billion euros in deficit prior to 2013 that, according to the Finance Ministry, was concealed by Catalonia, although the Catalan Finance Minister, Andreu Mas-Colell, says that this was known to the central government.

Catalonia is the region that will receive the most money from this new loan, but it will have "additional specific controls" to do with transparency, according to the vice-president. These controls, according to Montoro, will require the Generalitat to establish an online connection with the Spanish government, via an access point for electronic invoices, so as to have "greater traceability": that is, so as to know what all the money is being spent on. It will also require the Comptroller to issue a monthly certificate of execution for the entire budget to guarantee that it does not "contravene the law".

In short, the Generalitat's spending will come under even greater scrutiny by the Spanish government, which will be able to veto items that it believes to be illegal. In addition, the Spanish Treasury will have to approve debt operations one-by-one, and will offer "protection to public employees for the execution of these measures".