On debt, fiscal deficit and autonomous communities in Spain

This is a sound  Col·lectiu Emma's reply to an article that appeared in the Financial Times about debt in Spain's autonomous regions:

We can't but agree with the FT's description of the financial straits that the Spanish autonomous communities find themselves in ("Cash-starved Catalonia turns to locals"). Col·lectiu Emma is on record ("A Public Reply to the Business Week") denouncing the tendency to create large public sectors in the regions, including Catalonia under the present Socialist-led administration. But we think that it would be unfair to blame the regions for all the country's ills, and particularly to single out Catalonia on that count.

It must be recalled that the autonomous governments now provide most public services and manage around half of total spending. And yet, their combined deficit in 2010 is estimated at around 2.4% of the national GDP, while that of the central government is closer to 9%. So the central government should by no means be let off the hook: consider, among many other examples of waste and duplication, extravagant projects like the high-speed railway, which no one expects to turn a profit any time soon, or the continued existence of whole ministries (Health, Culture, Housing) whose functions have all been transferred to the regions and that should have been scrapped accordingly.

Also, some regions are more profligate than others. Just compare the size of the civil service in Catalonia (about 8% of the working population) with the figures for Extremadura (23%) or with a Spanish average of 15%. Unfortunately, the Spanish devolution system doesn't contemplate any measure of fiscal responsibility by those who get to spend the money. Since most regions are net recipients, their governments have little incentive for wisely managing their budgets, while net contributors like Catalonia, who have no say in the way that funds are distributed, are required to foot the bill regardless.

Note that the Catalan debt (around 33 billion euros in March 2010) amounts to one and a half times the sum that the central government collects from Catalonia every year and uses for its own purposes outside the region – a total estimated at over 20 billion euros, or 10% of the region's GDP. If Catalans had a chance to devote to their own pressing needs that substantial share of their own money, their deficit could be easily squared up, and in very little time. This, more than anything else, explains the present difficulties in Catalonia, and also points the way to their solution.