January 5, 2012 8:12 pm

Catalonia rejects Madrid budget controls

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Catalonia has rejected plans by the new Spanish government to impose strict controls on budgets, accusing Madrid of trying to usurp the powers of the 17 autonomous regions.

“We would consider as a red line anything looking like previous line-by-line approval of our budget proposals,” Andreu Mas-Colell, finance minister in the Catalan government, told the Financial Times on Thursday. “It’s something we will resist with all our political and legal resources.”

Francesc Homs, spokesman for the Catalan nationalist government of the territory, which has an economy the size of Portugal’s, called the central government’s proposals “inadmissible and unacceptable”.

The Canaries administration also said it would not tolerate the centre-right Spanish government of Mariano Rajoy, Popular party prime minister, “recentralising” and taking over autonomous powers. Other regions, however, including PP-controlled Madrid and Castilla La Mancha, either backed the move or did not object.

They were reacting to plans announced by Luis de Guindos, Spain’s new economy minister, who said in an FT interview on Wednesday that regional ministers would have to receive prior approval for their budgets.

Mr de Guindos and his PP cabinet colleagues, who took over from the Socialists two weeks ago after winning a general election in November, are struggling to impose drastic cuts on the national budget deficit to reach a target of 4.4 per cent of gross domestic product this year, compared with an estimated 8.2 per cent in 2011.

They have identified the regional governments as the main culprits in the failure to reach the 2011 target of 6 per cent of GDP – an aim agreed with the European Union to stabilise the eurozone.

But Catalonia, in particular, jealously guards the autonomy accorded to Spanish regions in the 1978 constitution that followed the death of the dictator Franco. Catalan and Canaries officials have said they might challenge the constitutionality of Mr de Guindos’s proposals.

Mr Mas-Colell said Catalonia had imposed its own austerity plan and was committed to limiting its deficit this year to 1.3 per cent of regional GDP as agreed with the centre, which has substantial power over the regions because it has the power to authorise or veto the issuance of public debt.

Catalonia, he said, did not want to cede more power over its finances.

“We think financial autonomy and the preparation of the budget is the essence of self-government,” he said.

Some Spanish regions and municipalities are suffering severe liquidity shortages as a result of the three-year-old economic crisis, and Mr de Guindos said this was an opportunity to rein in the overspending that has contributed to Spain’s deficits and its rising debt burden.

In the latest attempt to bring public finances under control, Soraya Sáenz de Santamaría, deputy prime minister, on Thursday said the government was reviving a drive to abolish 515 unnecessary public companies, foundations and consortiums across the country.

The number of such bodies doubled in the five years to 2009, and there were more than 4,000 in existence today, she said.

The government also said it would seek to reduce the size of the black economy by restricting payments using large sums of cash and by targeting tax evaders to raise €8.2bn.

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