Could you tell us your name?
Mi name is Erika Rubio… Let’s start over, this one’s not good.
What’s your name? Where and when were you born?
My name is Erika Rubio. I was born in Barcelona the year 78. In March of the 78, which I think is important here.
What’s your profession?
I’m a financial lawyer. It’s my job to aid the taxpayer with taxes and advise regarding investments and finding tax law for the citizen.
Let’s talk about the public treasury in a regional and state level. There isn’t much agreement between Catalonia and Spain, so we want you to show us both sides of the story.
What would you say caused the economic crisis that started in 2008 and still continues?
Well, in general terms, on a Spanish level it coincided with a worldwide crisis, but here in Spain there were additional elements. A widely known factor is the real state issue.
In this country, there has been a big tendency to base economy in what’s known as ‘brick economy’, investing in real state. That’s when it was started, specially by the town halls, the transfer of land to build and they made excessive buildings.
There was a… altogether with bank funding, that started giving huge loans without a checking if the people could pay, without any information.
It all generated a fake feeling of economic goodness, because everyone could buy a flat, everyone could travel, everyone could do everything. People who had very low salaries started making a lot of money suddenly and everything seemed perfect and magnificent.
That started, I think that around 2007 there were already signs and by 2008 it became obvious. But the government of that time, led by Rodríguez Zapatero if I remember correctly, denied it, said that everything was going great. That is until the bit real state agencies and banking companies started to fall even outside of Spain, that was the big boom.
That’s what we know started the crisis on a state level. Together with the financial issues and the stock exchanges around the world.
What did Catalonia do to try to solve the crisis?
Here in Catalonia the crisis is understood as twofold. There has always been a feeling from the Catalan government, not that I’m taking sides and speaking from what the government says, that we’re not getting back all that we contribute.
Then, when the crisis was felt in Catalonia too and the Catalan government was in trouble to pay the salaries of the public workers.
What did they do? It’s not like the Catalan government has many ruling competencies, specially to get income that are taxes.
They tried making cutbacks, the famous cuts about which there have been many demonstrations.
This cutbacks, well many of them were set by the national government, that’s the one with the competencies and you have the management and execution of those cutbacks.
They cut back on the state workers, they cut short salary bonuses, freezing salaries, of high ranking workers too, just like the national government.
And the expense, education, health service, it was set by the national government too. There was an attempt, in the competencies we have regarding taxes, to create an own tax, which affected banks if I’m not wrong.
But the national government didn’t agree, took it to the supreme court and they said it wasn’t applicable so the state made it more elaborate since they had the competencies.
It’s a series of circumstances that I think more could have been done but we didn’t have the tools to execute them.
What did the central government do to fight the crisis?
Well, the central government is basically the same but putting the load on the autonomic communities. One of the things they did is saying, Brussels is saying that we have to make this expense limits, get the deficit down and all that. You have to do it, or else you won’t get the transfers of the money that belongs to you.
It was a bit hard to understand because you’re not making cutbacks where you should. You’re focusing, like before, in education and health services. And that harms the citizen that has low income. Meanwhile you see institutions that are doubled, that aren’t necessary and then know that they could have fit the cutbacks more.
The government did that, freezing the pay of the state workers, extra pays and the tax raises.
The issue that was more felt was the IVA, because that’s a tax on consume that’s paid by the citizen. Today, something is worth x, tomorrow it’s worth more than x, that’s a big setback.
We need to think that the issue of taxes is a complex issue, because we’re communities and there are state taxes, ceded taxes, own taxes… Most of the tax collection is done by the central state and then shared with each of the autonomic communities.
Nowadays, DGP is twice the levels from before the crisis. But unemployment is still high, salaries are still low and we can see, at least here in Barcelona, people from working class that has problems to just pay housing. What’s the difference if it’s returning to those levels?
Those are very complex topics. To calculate the GDP, depending on the economist they will take some or other numbers. That it is returning to levels from before the crisis, in my humble opinion as I’m a financial lawyer, not an economist, can be true as it is the wealth generated by a country, but maybe it’s not looking at the debt that country has.
We have very high indebtment levels and no matter how much the wealth grows, it’s not proportional.
The growth is made, often, in detriment of low or precarious salaries or without legalizing it. That can make the income of a country enlarge but the citizen feels that there’s no job or the job is very precarious.
That, together with a high indebtment level, is very tough to settle. It’s true that, despite unemployment being high, in the last 3 or 4 months there’s been a lot more movement.
But I think that we are falling back to the same mistake from before. Five years ago, all the real estate agencies closed down, and now you find them everywhere.
We’re, once again, basing an economy in real estate and building.
What’s the Basque economic agreement?
I suppose that’s hard to understand for foreigners, but the Basque country economic agreement is a sort of agreement between the central government and the Basque country. It comes from the late XIX century, 1870, and it was made to annex all the provinces in the Basque country to the central crown.
Nowadays, it consists in them having a system where they can regulate their own taxes and collect them. While they do have to be very similar to those in the rest of the country, they have their own IRS, collect, and then pay a part to the government.
This part depends on the services that the central government provies the Basque country with. Every twenty years the framework is regulated and every five the part is.
They have the advantage of having the money and then giving it, so that they don’t have to wait for the transference from the state as it happens with, say, Catalonia.
And the Navarra agreement?
The Navarra agreement is very similar. Although it has always been spoken about less, it predates that from the Basque country. It has always been valid, unlike the Basque country one. During Francoism, it was frozen and applied only to Araba, but I’m not sure of the last part.
But the Navarra one has always been valid, from around the 1800. It’s very similar, they collect taxes, legislate their own taxes but instead of the part it’s called the quota.
The similarity is due to the Basque country one copying the Navarra one. A lot of people think that the Basque country one came first and the Navarra one later. It’s all because those lands weren’t properly part of the crown so they made some agreements. They have been observed until today, at least the Navarrese one.
Catalonia is considered a rather wealthy region, why is it in such fiscal debt?
The issue of fiscal debt is complex. We need to think that fiscal debt is how much money am I contributing to the government against how much I am receiving.
What’s not clear in this topic, and it’s a very controversial one, are the amounts on each side, because depending on how one or the other calculates it you get different numbers. What’s the issue? According to the Catalan government, we are paying x taxes and receiving x minus 10.
That’s not fair. Is an issue of the funding system of autonomic communities and the fact that we give and then they give back according to our need.
Often these transfers are not automatic. When I’m collecting a tax, I don’t get it directly. First an advance is made and later we will make the exact numbers.
There’s also the issue of infrastructure, which is a competency of the central government. There are old promises that have been dragged for a long time and that gives the feeling that the fiscal debt is bigger.
You say, let’s look at this year. I’ve paid, I’m making it up, 10.000 million euros and they’ve only invested in me 6 million euros, what has happened here?
It’s something that happens in most autonomic communities. In others it’s the exact opposite, but in this happens in the big ones: you make contribution than what you get.
The problem is that, since we have no clear numbers, it’s not clear what the fiscal balances are on either side.
You’ve just mentioned old promises that are still dragged, can you talk more about this?
Well, the topic of infrastructure. In the autonomy statute there was supposed to be made a contribution equivalent to about a 9% of the GPD on infrastructure of Catalonia. But then, the government has said that it was illustrative, if a year it was a 10% and the other an 8% was according to the budget.
There’s been much heard about it regarding the Mediterranean corridor. It’s an infrastructure that is very demanded by Catalonia and the Basque country, because it opens us the door from Africa to France. But there have always been many reasons to state that these investments couldn’t be made. Even the supreme court has defended many times the state in these controversies.
Why does the deficit keep growing?
I suppose… On a state level or a Catalan level?
Both. I think that deficit continues because economy doesn’t bud, it can’t grow, and there’s a lot of restructuration that should be made on a level of… We’ve had mane structures that have fallen, the Spanish banking system has fallen, many money injections have been needed.
What I mean is that it’s tough. No matter how well the economy goes to cover up debts, so to speak. I could, if I didn’t have all my historical debts that I need to take care of, maybe the economy would be able to carry on, both the Spanish and the Catalan. But we have a historical debt that needs to be covered and no matter how well we see the economy goes, it doesn’t show because it’s impossible to get a net budget.
It can be now seen that, for example, Valencia has a GDP slightly under the national average, while the money they get from the state are above the average. How is that explained?
That’s a bit difficult, for me, to understand. I too wonder about it.
Think that the return rules are not as easy delimit. It’s something that is made according to the population, according to the level of tax collection.
It’s a country the GDP of which is growing, because economical advances are made, but it doesn’t have a proportional tax collection and need more injection from the state. Because they are such complex calculating rules.
The rules are clear, but where the numbers come from is difficutl.
I wish I could give you a straight answer, I wonder that many times too.
It’s often said that the Catalan government has been underfinanced systematically. Is that common among other regions?
The issue of Catalonia is very evident because Catalonia is one of the economic engines of Spain.
It’s one of the places where unemployment isn’t as high as in the others, where there are more entrepreneur companies. There are many companies from outside that come and settle here.
So here we need many more resources, we have a bigger population, we need more needs, than maybe another poorer community that doesn’t have as many needs to cover with what they receive.
So you have the feeling as a citizen, from what you hear, that there’s something that isn’t up to scratch. It’s what I was saygin before, about returns, I pay so many taxes, how much do I get back?
It’s like RENFE. Of the commuter lines we were ceded the collection or management but not the infrastructure. That’s why we couldn’t make the proper remodeling, it was the state’s competency. If the state doesn’t want to invest, I have no power.
I think that yes, the government can have this feeling. But it’s also true that, living here in Catalonia, you have information of the government here. Maybe it’s not as much as the government sais, but I think it’s objectively happening.
How did the regional financial system changed in 2009?
In 2009 there was a regional financial system reform and it was when, to help the autonomic communities have more income, what was done is this. There are some taxes, if you want later I can give you the complete list, that are given to the autonomic communities so they have part of the collection.
This collection, for example with the IVA went from 25 to 50%, same with the IRPF, and all the special taxes on alcohol or gas went over 58%.
What does the autonomic community get from this? Not having to wait for the government to give you the money and you collect them directly.
At the same time they were given more normative competency. For example, Catalonia was given from the IRPF the competency to regulate the autonomic stretch widely. Be able to apply their own reductions as well as get to adjust, it was one of the ways that, when you asked me before what did the Catalan government do? They raised the autonomic stretch of the IRPF because it’s one that they collect themselves to be able to pay all the expense they had to do.
Then, with this normative, this reform, it was made the sufficiency fund, I think it’s called.
It’s a fund that, in theory, the state says, what are your interests? It’s these, the services you need from the state is so much. The part you can’t make it to, the difference is granted in a way by the state.
This fund, actually, from many of the money we all contribute a community with this fund on a more negative level will have a bigger share than another one that doesn’t.
It was allowed to make a bit… For Catalonia it’s no big change. All it has made is that we collect a bit more and have a bit more competency when it comes to legislate and determine taxes.
The sufficiency fund you just mentioned I think is now called equity fund.
Yes, maybe, yes.
They say it should have reduced regional debt…
In theory, yes.
…but here in Catalonia it seems it didn’t work. Why do you think that happened?
It’s the same thing. The way the calculus are made, the way to determine this parameters is according to the numbers from the state.
So it’s the state that says, look, you have this many inhabitants, so many meters, so many services, what corresponds you is this or that.
It can be the case that even though it’s a system closing fund, to make all autonomic communities equal and all the citizens have the same benefits, maybe it’s not working.
The issue is that those are very complex topics, because not even they can tell how it works nor, of course, why it doesn’t work.
There are people who say that if this equalization happened, it would be a risk for the state because it could cause more regions to strive for independence. What can you say about it?
I think that if all the communities were actually equal, but being well, it wouldn’t bring any more independence issue because people would be fine.
Something is very clear, the issue of Catalonia, besides from being economic, also has cultural, ideologic and language issues.
But in the rest of the country, if the citizen sees their needs are covered, I don’t think there would be that spirit of being something more autonomous, of being more than a simple region that depends on many things from the central state.
I think that that, from my point of view, wouldn’t bring more independence because no… I don’t think so, they don’t have other facets that weight a lot [more here in Catalonia than in the rest of the country.
What would be the economic impact on Spain if Catalonia became independent but stayed as a member of the UE, the UN, kept the euro…
That’s a rather complex topic and from the information we have, if there was a separation of Catalonia from Spain and it was independent and allowed to stay in the UE, the effect wouldn’t be as bad as some say.
Why? Because it would keep the same coin, would have free movement of good and people, so the daily business with Spain wouldn’t have any kind of slowing and you’d have access to the European funds, bank funds and guarantee funds, which gives you some stability.
It would be easier, because it would then be more like a friendly divorce.
Of course, if this didn’t happen, it’s true that there’s something we need to keep in mind. If Catalonia gets separated from the state, it needs to create new infrastructure that have to be paid and created anew.
Even though maybe, in economically speaking, Catalonia is obviously a wealthy nation that could live apart from the state, initially it would have some tough years. It’s like when you buy a flat, when you make the initial investment it’s much more expensive, but then you only need to pay the monthly mortgage. But at first you need to face many payments.
If, on top of that, you’re out of the UE, you have no access to some funds, we’d have a tough time at first without being able to access some of these income sources or guarantees.
Tolls in highways are something that has many people pissed off, can you talk about that?
The topic of highways is very controversial, specially taking into account that Catalonia, compared to the rest of the country, we always need a point of comparison, is where there are more tolled highways.
Highways, so it can be understood, you are given a concession to exploit it for a certain time because you have paid part of the expenses to buy said highway.
What happens here? These highways have been working a lot of years and they are more than paid off. Not only paid off, because it’s logical that the company who did it doesn’t only want to pay off the works, also wants to make money from the investment.
What’s not proportional is that in the rest of the country there are made roads that are not subjected to tolls while here in Catalonia we have expensive highways that aren’t even in good condition.
Sometimes you even say, I paid the highway and had to suffer through a huge traffic jam because it was completely blocked.
That’s a tough topic. There was even a campaign here in Catalonia not to pay, and everyone would blow the horn and they’d lift the barrier, nobody wanted to… there were people who said, no, I don’t want to pay.
I don’t remember the slogan of that campaign, but despite all the noise that was made, we never got to… Well, some taxpayers got tickets for not paying the tolls.
I’ve heard people asking about where is the money to become an independent nation going to come from, and I’ve heard talk of making Barcelona the entry port for china. Have you heard any of this?
No, I think Barcelona has been talked about much because Barcelona has always been a port of entry and communication and very open.
Maybe that’s what you’ve heard about. Barcelona has always received many traders, foreigners, it’s very open minded. It’s true that in a separation without limitations from the state, a policy with that goal could be made, even though Barcelona is already a city known worldwide, both for business and otherwise. It has the movile world congress and now wanted to get, with the whole Brexit thing, that the European Medicines Agency, that is in England, moved to Barcelona because the pharmaceutical business is strong in Barcelona.
I suppose that all this, we have the harbor, we have the train, we have the airport, we have an exceptional location, we could grow a lot because on an European or world level we are a city and country that is very attractive for companies and for people to live in.
There’s a lot of talk and people worried about tourism. What’s the economic impact of tourism?
In Barcelona, the impact of tourism is huge. Not only for Catalonia, but also for the rest of the state. Companies increase their billing and pay more taxes. That’s in favor of everyone.
The problem is that it’s true that people who live here in Barcelona, despite it having a huge economic impact, because there are also cruises that come, make a stop, many people come down, they shop and go away again.
The establishments, restaurant business, it’s a huge economic engine.
It’s true that tourism should be a bit more regulated, but compared to other European places, it’s very difficult to regulate the entrance and exit of tourists in a city like Barcelona.
It’s true that there are neighborhoods in Barcelona that are very affected, because those are neighborhoods where people live and sometimes finds a kind of tourism that doesn’t respect sleep hours, the urban amenities, etc.
But I think that you can’t turn your back on tourism because it’s a source of income. We are a country with a nice climate, a nice vibe and an attractive destination overall.
So it should be exploited but with sensibility and without limits. You can also talk about the Barcelona city hall, that’d be another topic for debate.
Another topic regarding tourism is housing, because the prices are increasing and people are forced to live outside the city. On the other hand, there are so many buildings in the city that are empty, abandoned.
There are two topics here. One of the facets of the crisis is also the rise that has been in a year here in the pricing of flats.
It was a measure by the government, is the golden Visa.
On the other hand, the topic of empty buildings. In the center of Barcelona there are many empty buildings that could be made use of, maybe as rental, not public housing because it’s the center of Barcelona and I don’t think they have the features, but they could be used as touristic flats or hotels.
Why not? Well, one of the policies of the town hall is that it’s no longer giving licenses to make touristic apartments, hotels or the like.
So, what happens? If you have a building in the center of Barcelona, you find you’re a bit limited in your options and you’re losing money
The same way that they are even limiting remodeling in working hotels. If I have a hotel that is working and is broken, the town hall makes it difficult to get a license, because they think, well, I don’t know what they think.
What you’re doing is harm work places and local economy.
For the last six or seven years, I’ve certainly noticed, the small, locally owned stores have turned into big, franchise stores. What happened?
The problem here is that many businesses in Barcelona paid what was called elder rent. Those were very old rental agreements that paid a very low rent.
There was a moment when a normative was approved to raise all those rents. What happened? It’s where there were shops or business, the typical shop from Barcelona, with many canned food or clothes or anything.
If they rose the price in Passeig de Gràcia or in Rambla, they had to close. And what happened? That many emblematic and historical businesses in the center of Barcelona were forced to close down.
And what’s been happening? That big multinational companies have been buying them because they can pay. Even if they don’t have enough income in the store, it’s a kind of publicity for them and see it as publicity costs, not related to the amount of sales in that store.
What happens? A business from here would have to sell a lot to pay rents of 5.000, 10.000, 15.000 euros a month.