by Col·lectiu Emma
Notes on the bailout request from the Catalan government
The 5 billion euro bailout that Catalonia formally requested from the
Spanish government yesterday quickly made the front pages of the
financial press all over the world. It is sad news for all that what
is probably the most dynamic and productive region in the south of
Europe should find itself in such dire straits.
One reason for the calamitous state of Catalan public finances is the
overspending of the last several years. Counting on the windfall from
the real estate boom, all regional and local administrations in Spain
and the central government itself squandered every euro that came
their way and more. Now the time has come for all of them, including
Catalans, to pay their debts.
With the strict austerity measures that are already in place, and
relying on its economic base, which remains strong, Catalonia could do
just that, and in a reasonably short period. Most other communities
would have a harder time, as would the central government if it didn't
have at its disposal the considerable amounts that Catalonia
contributes to the public purse.
One very relevant factor that is not often given the weight it
deserves is what The DailyTelegraph recently described as "the
perversities of the Spanish tax system". Of the total sums that
Catalans fork over to the state's coffers, an amount representing over
8% of the regional GDP, or around 16 billion euros a year, doesn't
come back to them in the form of public services or productive
investments. The central government simply keeps the money for its own
ends, including redistribution to other chronically unproductive
regions. In practice, then, what Catalonia will be getting from the
central government is its own money, which will then have to be repaid
with interest. Again in The DailyTelegraph's words, Catalans have been
forced "to request a 'rescue' even though theysubsidize the rest of
the country".
So perhaps the newsworthy item today is not the bailout itself, which
was a foregone conclusion, but the circumstances surrounding it. And
some of its likely repercussions, including in the political field.
Essentially the Catalan administration's insistence on a new fiscal
arrangement with Spain –which, by the way, the central government has
explicitly spurned on various occasions. And the growing clamor coming
from every sector of Catalan society. Catalans are now demanding from
their leaders a tougher stance toward the central government. Some
ways to a solution have been pointed out. It is now for the Catalan
authorities, supported by a constituency that is losing patience with
this state of affairs, to act on them.
http://emma-col-cat.blogspot.com.es/2012/08/the-reasons-behind-catalonias-financial.html
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