Thursday, October 16, 2014

Catalonia’s main employers’ associations criticise the Spanish Government’s 2015 budget: the lowest in 17 years


Pimec’s President, Josep González
Far below what is required for current infrastructure developments

Catalonia’s main employers’ associations, Pimec and Foment, have expressed their outrage at the new budget figures proposed by the Spanish Government for 2015 and its planned investment in Catalonia. The €1,072.26 million of territorial investment allocated to Catalonia represents 9.5% of Spain’s total budget, while the percentage is half the weight of Catalonia within Spain’s GDP (19%) and is very far from what it represents in population terms (16%). From a purely economic point of view, this has been seen by the employers’ associations as “a missed opportunity” to invest in Spain’s most productive area, which is currently leading the economic recovery. The proposed investment for Catalonia, the lowest in 17 years, is far below what is required for current infrastructure developments, despite the economic crisis.

According to Foment, Catalonia’s main employers’ association that groups its largest companies, investment is sorely needed for “essential” projects such as improved railway access to the Port of Barcelona, an area with enormous potential for international investment, and to complete the priority road networks, investment for which Catalonia has been “waiting for years”. This inadequate budget has been viewed as “a missed opportunity”, both for economic development in an area leading Spain’s economic recovery, and a lost chance for dialogue between Catalonia and Spain, at a time of high political tension between the two due to the independence debate.


Employers’ associations outraged at Spanish Government’s 2015 investment in Catalonia

Catalonia’s main employers’ associations, Foment and Pimec, have expressed their outrage over the 2015 budget proposal for Catalonia, announced by the Spanish Government last week. Foment represents Catalonia’s biggest companies and Pimec its small and medium-sized enterprises. Both organisations have expressed a “total rejection” of the Spanish Government’s draft budget for 2015, announced by the Spanish Finance Minister Cristóbal Montoro, as figures reveal that investment in Catalonia will drop to 9.5% of Spain’s total. The figure represents the “lowest percentage since 1998″ and “far from the maximum of the last 20 years,” which was 15.9% in 2003. However, all those percentages are far from what Catalonia represents in terms of GDP and population, respectively being 19% and 16% of Spain’s total.

“Total rejection” of a budget “inadequate” for the improvement of economy

Both employers have expressed their “total rejection” of the new budget, as it falls far short of the investment sorely needed to complete current projects in Catalonia, and harness its economic potential. Not only has the figure, the lowest investment from the Spanish Government in the last 17 years, in relative terms, been criticised for coming at a time of tension between Catalonia and Spain, it is also far from supporting the economic recovery. Catalonia is currently leading Spain’s recovery, through its industry, export and tourism sectors, which need high level infrastructure.

These low figures are the latest in decades of infra-budgeting for Catalan infrastructure. So evident has this been, in 2005 the Spanish Parliament approved a law to allocate to Catalonia at least the equivalent of its weight with Spain’s GDP (equivalent to 19%) between 2007 and 2013 as a way to compensate for this lack of investment. However, it was never respected during those 7 years, even though the legal obligation was expressed in percentage terms (19% of Spain’s total territorial investment) and not in absolute terms (with a specific amount of money). On top of this. last year (the last one when it should have reached at least 19%, according to the current legislation) the investment was particularly low (9.6%). Incidentally, this was the first budget prepared after a majority of the Catalan society put forward its independence demands in September 2012.

“Catalonia clearly discriminated against once again”

According to Josep González, who is President of Pimec, the new Spanish Government’s budget is a sign that “Catalonia is clearly discriminated against once again”. According to him, the Spanish Government “keeps focusing on unproductive infrastructure such as the AVE high speed train [to rural areas], with a low return on investment and that are not aligned with a policy of deficit reduction,” he pointed out. Similarly, employers led by Josep Gonzalez lamented that the new budget does not contemplate measures to improve competitiveness in the small and medium enterprises, such as the reduction of social security contributions or the reduction of energy costs. According to Pimec, the budget presents “overly optimistic macroeconomic assumptions.”

The Catalan association of SMEs found that the gap between estimates of revenue and expenditure meant that the bulk of the increase would have to come from higher income tax and VAT, “in circumstances that mean they will not be easy to get”. Moreover, Pimec accounts are still showing alarming alerts, of a public debt that is already “too high”.

“The deficit continues to be asymmetrically and arbitrarily distributed between the State [Spanish Government level] and the Autonomous Communities [such as Catalonia], benefiting only the State,” warned the Catalan employers, who there are “significant gaps” in spending in areas such as energy.

A “missed opportunity” for dialogue between Catalonia and Spain

The Spanish Government’s budget proposal for 2015 comes at a time of high political tension between Spain and Catalonia, with the latter’s independence movement gaining increasing popularity. There are also a significant number of voters who would prefer increased autonomy over breaking away. Many have seen the new budget, the lowest 17 years allocated to Catalonia, as a missed opportunity for fostering economic recovery and political dialogue. In refusing the former, the Spanish Government may have lost the opportunity for the latter.

The employers’ associations regret that the planned budget of 2015 for Catalonia does not promote “dialogue, negotiation and agreement” with Catalonia. Ramon Adell, the Director of the Foment’s Commission for the Economy and Taxation, regretted that the investment budget to Catalonia posts a figure that “is insufficient: from the economic point of view, it deepens the divide between Catalonia and its development, seen many time”. During a press conference held on Tuesday, Adell said that Catalonia, “as the engine of recovery, deserves a greater investment in infrastructure.”

Adell lamented that “long periods of instability are bad for the economy” and recalled that Joaquim Gay Montellà, the President of Foment, repeatedly defended “dialogue, negotiation and consensus” as being the way to reach an agreement between the Catalan and Spanish Governments. However, the Spanish Executive’s budget for 2015 does not seem to proceed in this way.


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