New regional government financing strategy is on the table

Alicia Sánchez Camacho received zero praise from her party yesterday for her new proposal on how to finance Catalonia's government. National Finance Minister Cristóbal Montoro made it clear last Saturday in an interview with elEconomista that Catalonia should use the same financing model as other regional governments in Spain. Peoples' Party leaders are not the only ones who are split. The difference of opinion also exists within the Spanish Socialist Workers' Party and the Convergence and Union party, where the rift is particularly sharp.

Independent of the political squabbles everyone agrees, as do the majority of voters, that the current financing model is a sinking ship and that we need a new one. The current system's Achilles heel is that it gives regional government's full liberty on spending, but not enough control about how they earn revenues. This disparity is one reason that the regions have accumulated high deficits.

A financing system reform is on the table. The Ministry of Finance wants to put it in place by the first quarter of 2014, but for it to be effective neither side can get everything it wants. Some regional governments want to have total oversight of how they administer direct taxes -- they would leave indirect taxes to the national government -- but not all of want to assume this level of control.

Many of them are still regretting taking over education and healthcare responsibilities, because they did not have the infrastructure to manage these services. There is no reason to force some regions to adapt to other regions' needs, nor vice versa. They all have different needs, and a new financing system should be created to solve this imbalance. To get there, an open-minded and fresh discussion is needed.