Catalonia says no to austerity in standoff with government

[Bernkastel]

From the Guardian.

The Spanish region of Catalonia will not make the spending cuts necessary to achieve its 2013 budget deficit as they would be impossible to impose, the region's economy minister Andreu Mas-Colell told Reuters.

Catalonia would need to cut €4.8bn (£4bn) from its budget, which includes health and education spending, to meet the central government's target of 0.7 percent of gross domestic product, Mas-Colell said. "We will not make these cuts," he said. "It is just impossible, I don't know how to even start."

Reining in the spending of Spain's 17 regional governments is key to the country achieving overall budget deficit targets imposed by Brussels, though the goals are likely to be increased to give Spain more time, leeway that will be passed on to the regions.

Catalonia, whose leader Artur Mas is driving for independence from Spain, has an economy almost as big as Portugal's and generates one fifth of Spanish gross domestic product. The region overshot a 1.5% deficit target by 0.5 percentage points in 2012. Catalonia's leader is in a standoff with Spain's prime minister Mariano Rajoy, as the Catalans plan on holding a referendum on independence next year. The central government, meanwhile, has the power to give the region more time to balance its books.

The region's Treasury faces total bond redemptions of €4.8bn by 3 May, according to Thomson Reuters data. Catalonia has formally requested €9.1bn for this year from the central government's liquidity fund, of which €7.7bn will be used to pay bondholders.

The Catalan government has yet to approve its budget for 2013 – the only one of Spain's 17 regional territories not to have done so – as it waits the expected softening of targets from Brussels for Spain. "We think it makes sense to wait to present the budget until we know the precise (deficit target) figure," Mas-Colell said.

Spain will increase its 2013 deficit target to 6% of gross domestic product, a government source has told Reuters, and is negotiating with the European commission for more time to cut its fiscal gap to 3% of GDP, currently targeted for 2014.