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Tamaño letra

At the worst moment

The regional premier of Catalonia should shelve fiscal pact until a recovery is underway

Although the Catalan premier, Artur Mas, has staked many of his political expectations on the “fiscal pact,” which establishes the fiscal relationship between the state and the northeastern region, this is not the solution to the ills of the Catalan economy. The Spanish economy, just like the Catalan economy, is suffering the consequences of the worst recession in the last 30 years, as well as a dire crisis of investor confidence, not to mention the European institutions; as the situation worsens, the political response in Spain shifts from the national to the regional level.

The so-called fiscal pact — the Catalan government wants complete fiscal independence and its own tax collection agency — is not a priority in an emergency context; what’s more, it sounds like a frivolity after the Catalan government expressed its willingness to apply for the state Liquidity Fund to save the refinancing of over five billion euros in Catalan debt that will mature this year.

Insisting on the fiscal pact would be a debatable option even during a time of economic growth, but in the present situation it sounds more like ideological rhetoric than a real choice. Invoking the fiscal deficit (the difference between the money Catalonia gives and gets from the state), a favorite argument among Catalan nationalists, is a poorly argued excuse, because even if one agreed to compare Catalonia with national economies, it is obvious that countries with a sharp fiscal deficit with regard to neighboring economies are not suffering the consequences of lack of investor confidence and recession.

The Catalan economy could not survive the global liquidity crisis with a delusory fiscal autonomy, and the notion that a fiscal pact would make Catalonia’s debt smaller or nonexistent is just empty rhetoric. Catalonia’s public spending in any case requires an external financing system that the “limited solidarity” model, as Mas defines the fiscal pact, would be in no condition to provide. It also remains to be seen how Brussels, the European Central Bank and the markets would feel about a new fragmentation of debt commitments, unless of course what the Catalan government of CiU is proposing is a model whose debt ceiling is guaranteed by the Spanish Treasury. In this case, we would be going back to the nonsensical situation of a region demanding full autonomy while tapping the state’s Liquidity Fund.

This is not the time to get defiant about demanding a fiscal pact. This is nothing more than an exercise in opportunism, as Mas himself admitted to the regional parliament: “Spain as a whole is in the spotlight, yet the world is not looking at it kindly, but mistrustfully. In this context, Catalonia has a chance to assert itself as a country.”

The naked political truth is that invoking the fiscal pact allows Mas to compete on the flank of radical nationalism, divide the Socialists, exclude the Popular Party and offer moderate nationalists a mid-term rhetoric to hold on to. But in terms of economic rationality, the fiscal pact that was voted in on Wednesday is just playing to the gallery. Mas and his treasury commissioner would be better off negotiating a serious plan for reducing regional debt and keeping the deficit in check, and return to the issue of “limited solidarity” when economic recovery is a fact.