The reasons behind Catalonia's financial difficulties Notes on the bailout request from the Catalan government (Col·lectiu Emma)

The reasons behind Catalonia's financial difficulties 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. (Agost 2012)