• Junqueras says Spain disregards the EU on allocating spending
  • Spain may face sanctions after missing EU deficit goal in 2015

The European Union could help settle a long-running spending dispute between the central government and the regions if it used its beefed-up budget powers to send a new team of inspectors to Spain, according to Catalonia’s vice president, Oriol Junqueras.

QuickTake Catalonia

Junqueras, who oversees budget policy in Catalonia, said that European officials should intervene in the national budgeting process because the central government’s decisions are “arbitrary, inefficient and unjust” while ignoring EU guidance. The European Commission is considering whether to impose sanctions and increase oversight on Spain after Acting Prime Minister Mariano Rajoy breached the country’s deficit limit for a fourth straight year.

The Catalan finance chief said that Rajoy has struggled to tame the national deficit in part because he imposed unrealistic targets on the regions and that an EU intervention could help to resolve the problem before it escalated.

“We’re delighted to collaborate with European institutions,” Junqueras said in an interview at his office in Barcelona Wednesday. “Better a mission in situ than a fine.”

Junqueras, 47, is focusing on budget policy as he seeks allies for Catalonia’s struggle against officials in Madrid. Yet behind the dispute over spending, there’s a deeper conflict about the future of Spain’s biggest regional economy: the separatist administration in Barcelona is trying to set up state institutions in preparation for a definitive vote on independence next year, a process that Rajoy says is illegal.

Catalonia’s tussle with the national government over its finances has deterred investors from holding the region’s debt. Its February 2020 bonds yield 3.9 percent compared with 0.23 percent for similar duration debt issued by Spain. The gap of more than 370 basis points compares with 20 basis points for the Madrid region, the other mainstay of the Spanish economy.

Serial Elections

Announcing the government’s latest deficit figures in March, Budget Minister Cristobal Montoro said overspending by regional governments was to blame for the failure. He added a special jab for Catalonia, where the separatist government called an early election last year in a bid to show it had a majority for independence.

Catalan government officials “spent 2015 deciding whether or not to call elections” rather than focusing on their deficit, Montoro said.

Junqueras’s pro-independence alliance won a majority of delegates in the regional assembly but fell just short of a majority of votes, weakening their push for secession.

As Rajoy prepares for a second general election in six months, Junqueras is seeking to undermine the government’s claims to economic competence. He said the budget minister’s attempts to squeeze Catalan government finances are driven by political goals and are hurting the Spanish economy.

“Montoro’s decisions aren’t the best for things to go well for everyone,” he said. “The Spanish government is doing everything possible for things to be as they are.”

Budget Fight

Regional leaders have rejected Montoro’s call for them to legislate spending caps for 2016 as Spain tries to persuade the European Commission to allow the country an extra year to meet the bloc’s 3 percent deficit limit.

Spain’s economy grew 3.2 percent last year, about twice the pace of the rest of the euro area, while Catalonia expanded by 3.4 percent. The region’s budget deficit was 2.7 percent of its gross domestic product, more than any other region and three times the limit set by Montoro.

For 2016, Montoro has told regions including Catalonia to limit its budget deficit to 0.7 percent, a ratio that is “clearly not enough,” Junqueras said.

Junqueras said the regions need more leeway from the central government because they are responsible for health and education spending. He said that under EU guidelines that Montoro has ignored, Catalonia’s deficit limit should be at least 1.2 percent. The Budget Ministry has also disregarded the advice of the Spanish budget watchdog, set up in 2014 as a condition of Spain’s 2012 bailout program, Junqueras said.

“The minister should accept help,” Junqueras said.

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