Bloomberg News

Catalonia to Raise Tax, Cut Spending to Meet 2012 Budget Target

December 20, 2011

Dec. 20 (Bloomberg) -- The Spanish region of Catalonia, which has an economy the size of Portugal’s, approved a 2012 budget increasing tax and cutting spending to meet a deficit goal next year of 1.3 percent of gross domestic product.

The wealthiest of Spain’s 17 semi-autonomous regions forecasts 0.8 percent economic growth in 2012 and will reduce non-financial public spending by 0.7 percent, after 10 percent last year. It will increase taxes and other sources of revenue, the region said today in an e-mailed statement from Barcelona.

Spain’s regions control more than a third of the nation’s public spending, including health and education, and may contribute to its missing a budget-deficit target of 6 percent of economic output in 2011. Catalonia is ruled by the regional CiU nationalist party, whose pro-business policy is similar to the program defended by Prime Minister-elect Mariano Rajoy.

If the budget is approved by the regional parliament in the first quarter of 2012, Catalonia will save 625 million euros ($819 million) in wages through measures such as cutting bonuses of some 200 higher-ranking officials. It would increase tax receipts by 210 million euros a year by raising the tax on gasoline and creating a tax on tourists.

An additional 888 million euros would come from the sale of public buildings and management contracts in 2012. The region also plans to increase public tariffs such as the water tariff and charge patients for medical prescriptions.

--Editors: Alan Crawford, Eddie Buckle

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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