Suspension of financial autonomy

The Generalitat currently finds itself with virtually no financial autonomy, after its de facto suspension following the measures taken by the Spanish government. The situation is dire. This has been possible because the bulk of the Generalitat's revenue depends — one way or another— on the will of the Spanish government.

Where do these funds that must be transferred from Madrid come from? What is their origin? Well, obviously they originate in Catalonia and come from the taxes paid by Catalans. They are not giving us anything that we haven't already paid beforehand. A significant chunk stems from the funds raised in Catalonia through the main taxes: 50% of income tax, 50% of sales tax, and 58% of special taxes on certain goods are funneled to the Generalitat. These resources only amount to 63% of the Catalan government’s non-financing revenue, according to the 2015 budget. However, as these taxes are managed by the Spanish government via the Spanish Treasury, it is this body that must transfer the funds by means of a system of monthly advance payments.

Another portion —which amounts to 22% of all non-financed revenues of the Generalitat— is paid by Madrid in the form of subsidies. Therefore, 85% (63% plus 22%) of the non-financed resources of the Catalan government must be transferred by the State. Thus, the Generalitat's financial reliance on the State is complete.

Moreover, as the resources available to the Generalitat are insufficient to cover all of its spending needs, the Catalan government must borrow. This is a general problem for all of Spain’s autonomous regions, as their financing system is poorly designed and suffers from many shortcomings. Credit is given by the State via the so-called FLA (Regional Liquidity Fund), because the regions do not have access to financial markets due to the lack of revenue of their own, which is what would afford them solvency.

Where do these revenues that the State lends us come from? Again, from Catalan taxpayers. We have to keep in mind that for each euro that Catalans pay to the State, only 56 cents returns to Catalonia for public spending. The State keeps 44 cents for itself. Of this, they lend us a part, but we have to pay interest on it.

The measures taken recently aim to monitor how the FLA revenues and those transferred monthly in the form of advances are spent by the Catalan administration. In practical terms, the measures mean that the Spanish government is telling the Catalan government that if it wants to receive these funds, they must be spent solely on what Madrid authorizes. The Generalitat has been left without any decision-making power on financial matters. Financial autonomy has been suspended.

This suspension seeks, in my opinion, four main objectives. The first is to punish the Catalan government and the Catalans who support the independence process. This is despite the fact that they end up punishing all Catalans, pro-independence or not; if the money doesn't arrive, it throws a wrench into the works, regardless. The second goal is to suffocate the Generalitat financially and remove any leeway for the creation of state structures for a future independent country. The third objective is to spread the notion that, unless the Catalan government is “monitored”, they will waste resources on the independence process, and the provision of the most essential public services will not be guaranteed in Catalonia. In fact, this is the argument that has been used historically by various Spanish governments to delegitimize Catalan calls for better regional financing. The message that they have always strived to send is that the funds shouldn't be transferred to the Generalitat because they will be spent on promoting Catalan nationalism, and now independence. For instance, Catalonia’s public TV network has been mentioned many times as an example of these actions. Finally, the fourth goal is to create confusion among Catalans by making them believe that Catalonia would be economically unviable as an independent country, as it needs the resources provided by the Spanish government. Many Catalan citizens are unaware of the route followed by their tax money, as described at the beginning of this article, which makes it easy to confuse the public.

It should also be noted that there is a certain irony in the measures taken. For many years Catalonia has asked for special treatment in the way it is financed. It has not asked for privileges, but rather recognition of its national and economic reality. The various Spanish governments have always opposed this, along with the rest of the regional governments they share the same system. Now, for the first time ever, Catalonia is receiving special treatment, albeit negative, and not one other region in Spain has opposed it or spoken against it. It is clearly an attack on home rule, and none of the voices that have always stepped forward to denounce any attempt to treat Catalonia differently is saying anything. Where are the federalists in the face of this attack against regional self-rule?

To address this serious attack on the Generalitat's home rule and its autonomy, Catalonia must have a strong government as soon as possible, as well as unity among all the parties in favor of the independence process. It is also essential to have imagination and to find the tools to cope with the situation, and to use all available legal and political options. Finally, this must be denounced on an international level so that the world knows how the Spanish government acts in the face of a completely democratic and peaceful process.

 

The author is Professor of Economics at the University of Barcelona