Is Spanish sovereignty in danger?

SINCE the ‘transicion’ some 30 years ago successive Spanish Governments have been gradually handing over more power to the regions, the ‘Comunidades Autonomas’.

So much so that today, as well as the Central Government, Spain has an additional 17 Presidents and 17 Governments to contend with, each with considerable powers over budgets, taxes, and local affairs. 

Spain’s errant offspring, Cataluña and the Basque region, with its terrorist group ETA still a potential source of trouble, are demanding more autonomy, even seeking to be recognised as independent states, and nearly every region is seeking more freedom to use its local language and maintain its culture.

Cataluña’s recent decision to ban bullfighting from its region is an example of distancing itself from the rest of the country. At a time of financial crisis when there are calls from the IMF to reduce national debts, Spain is almost a mini Union within the European Union. 

Following the regional elections last May the socialist Government lost several important regions to the centre-right PP party. The knives are out as the incoming administration is slashing public services to reduce the debts they accuse the previous administration of burdening them with.

It is estimated that the Regions have a combined debt in excess of €130 billion. Part of the problem is linked to an unfortunate side effect of the power of the Regions. This is the endemic corruption that has existed between local politicians, real estate developers and local savings and mortgage lenders, the Cajas, involved in many shady land and property deals during the years of the housing bubble.

The crisis has now left many developers and the Cajas on the verge of bankruptcy, unfinished development projects and white elephants such as the airports at Castellon and Ciudad Real.

The developers survive due to the billions of Euros owed to the banks, which have little choice but to keep them afloat. The Cajas have had to merge and be rescued by the Government that has given them bank status, while several prominent political figures have been accused of fraud and misuse of public funds.

But while more than 4 million are unemployed in my view the Government has done little to prevent the virtually bankrupt Cajas from paying oversized salaries, pensions and indemnities to a privileged elite, who were surely responsible for the mismanagement on a vast scale.

Despite the Government calling on everyone to accept austerity measures and the regions cutting public services in health and education, some of these people, with connections to political parties, are now sitting on the boards of the newly created banks with even more favourable remuneration packages. And it has not prevented profitable, quoted companies on the IBEX stock exchange from increasing boardroom pay while announcing job cuts.

To redress the balance and raise more taxes from the wealthy, the new leader of the PSOE socialist party, Alfredo Perez Rubalcaba, has called for the wealth tax (Impuesto sobre el Patrimonio) to be reinstated. But it has not been welcomed by the Regions, which apply their own tax laws, creating a taxation minefield. It is not clear either how this might affect foreign residents and expat tax advisors will no doubt be watching events closely.

As the financial crisis deepens and with the election campaign underway, the Spanish Government has had to come to terms with the Regions’ debts, its demands and mass demonstrations from teachers as well as from other public and private sector unions.

The peaceful protestors against mainstream politicians they blame for the economic woes, Los Indignados (the indignant ), have not gone away either.

Whoever takes power after the elections on November 20 faces a winter of discontent. The future of Spain is in the balance. The Spanish King and Queen are popular, well respected and the cement that binds the country together. But for how long before the walls start to crumble?