Spain’s Socialist Prime Minister Pedro Sanchez, already under fire for promising to pardon Catalan separatists, is also clashing with opposition parties over how to share spending and revenue with the country’s regions.
Sanchez’s plan to grant amnesty to Catalan separatists involved in a failed 2017 secession has led to nationwide protest.
But he has also cut other deals with the Catalans to win their support and ensure a majority for his government in parliament.
Bowing to demands from the Republican Left of Catalonia (ERC), Sanchez agreed to forgive 15 billion euros ($16 billion) owed by Catalonia to the national government dating from the 2008 financial crisis.
Even though the Socialists are promising to extend this accord to other regions that borrowed under the same scheme, the concession has annoyed other regional governments, including those run by the left.
The accord reached Thursday with Junts per Catalunya, the second-largest independence group, also calls for favouring the return to Catalonia of companies that moved their headquarters away following the 2017 secession crisis, such as Caixabank and Naturgy.
– Claiming ‘100% of taxes’ –
Above all, in response to Junts’ demands that Catalonia keep all taxes raised in the region, the Socialists pledged to support the “financial autonomy” of the region and facilitate its access to financial markets.
The subject is sensitive in Spain, where the constitution guarantees a high degree of financial and fiscal autonomy to regions, as well as control over health and education spending, while still calling for solidarity between regions.
Currently two regions — the Basque country and Navarre — manage all taxes raised in their territory, handing over only a cut (the “cupo”) to the central government in exchange for the services it provides.
But their economic and budgetary weight is nowhere near that of Catalonia, which is the industrial motor of Spain and represents 20 percent of its economic output and 16 percent of its population.
According to the think tank Fedea, Catalonia in 2021 sent 2.2 billion euros more to the central government than it received.
Only two other regions out of 17 paid out more than they received: Madrid (6.3 billion euros) and the Balearic Islands (334 million).
– Pandora’s box? –
The organisation that represents Spain’s tax auditors said the accord would “violate the principle of equality between Spaniards” and create “first- and second-class regions”.
Sanchez’s Socialist Party has chosen to “favour a minority at the expense of the majority”, said Alberto Nunez-Feijoo, head of the centre-right Popular Party opposition.
It was strong showings by the Popular Party in regional elections that prompted Sanchez in May to call the snap election in July, which saw neither the Socialists nor the PP secure a majority in parliament.
But in hoping to obtain Catalan support, Sanchez’s promises threaten to open a costly Pandora’s box for the central government, many economists warn, with other regions such as Andalusia already asking for debt forgiveness.
“Debts must be paid,” Jose Maria Rotellar, director of the economic observatory at Francisco de Vitoria University, said in an article, warning of a “loss of credibility” and “insecurity about who will assume future regional debts”.
The Castilla-La Mancha region, run by a Socialist critic of Sanchez, threatened to sue the government over the Catalan pact.
Seeking to calm things down, the Socialists insist that no final decisions have been taken on fiscal matters.
“At no moment has the Socialist Party pledged to cede 100 percent of taxes” to Catalonia, Budget Minister Maria Jesus Montero has said.
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