fiscal consolidation and fiscal decentralisation in...
TRANSCRIPT
NOMBRE DEL DEPARTAMENTO 1
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN
DURING THE CRISIS AND BEYOND
Presentation based on some work done at the Banco de España:
Pérez, Javier J. and Rocío Prieto (2014), “The structure of sub-national public debt: liquidity vs credit risks”,
Banco de España Working Paper, forthcoming.
Hernández de Cos, Pablo and Javier J. Pérez (2013), “Sub-national public debt in Spain: political economy
issues and the role of fiscal rules and decentralization”, pp. 188-216 in Eur. Comission Econ. Papers, 501.
Onrubia, Jorge and Javier J. Pérez (2014), “La distribución de objetivos de déficit público nacional: ¿un
problema de reparto horizontal o vertical?”, mimeo.
Martí, Francisco (2011), “Descentralización y autonomía de las administraciones territoriales”, internal note,
Banco de España.
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
2
Overview
Spain has become a highly fiscally decentralized country since the late
1970s, and in particular since 1995/2002 (regional heterogeneity)
Sub-national spending amounts to some 70% of the total (2012, excl. SS).
Regions & municipalities had to bear a significant part of consolidation plans
Spain is the sixth sub-sovereign bond issuer world-wide, and regions were
perceived by “markets” since mid-2010 as a source of risk for the sovereign
A number of policy actions have been implemented since 2011, beyond
short-term fiscal retrenchment plans, including significant changes in national
fiscal rules, transparency, broad-ranging national liquidity/support funds, and
reforms that target structural spending
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
3
Spain is a highly, fiscally decentralized country (successive waves)
Departamento de Coyuntura y Previsión Económica
8
10
12
14
16
18
20
22
24
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Sub-national governments
Central government (excl Social Security)
Public spending (excluding internal transfers) as a percent of GDP (National Accounts)
CENTRAL; 38,323
SOCIAL SECURITY;
4,594
REGIONS; 126,885
LOCAL; 41,644
GENERAL GOVERNMENT CONSUMPTION IN 2012 (bn)
Additional material
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
4
Spain is a highly, fiscally decentralized country (successive waves)
Departamento de Coyuntura y Previsión Económica
Revenue decentralization (“ordinary-regime” regions)
1992-1996 1997-2000 2002-2008 2009-2014
INCOME TAX 15% 15% (up to 30%, some regulatory power)
33% (regulatory power)
50% (regulatory
power)
VAT 0% 0% 35% 50%
EXCISE DUTIES
0% 0% 40% 58%
on manufactured production of alcohol, tobacco and hydrocarbons
CEDED TAXES wealth tax, inheritance and gift tax, tax on property transfers and documented legal acts, tax on gaming (changes in regulatory powers over these sources of revenues over time), as of 2002 tax on electricity, tax on retail hydrocarbon sales, excise duty on specific means of transport
TRANSFERS (GUARANTEES) TO CLOSE THE SYSTEM
Additional material
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
5
Fiscal autonomy of subnational governments is relatively high
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
6
The crisis hit sub-national govnts’ fiscal positions
Public debt increased sharply... due to revenue shortfalls…
and persistent spending dynamics
Departamento de Coyuntura y Previsión Económica
0
4
8
12
16
20
35
45
55
65
75
85
90 92 94 96 98 00 02 04 06 08 10 12
General Government (left axis)
Regional Governments (right axis)
Percent of GDP
0.0
0.5
1.0
1.5
2.0
2.5
06 07 08 09 10 11 12
Tax on property transfers and documented legal acts, % GDP
18
20
22
24
06 07 08 09 10 11 12
Sub-national spending (excl. internal transfers), % GDP (NA)
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
7
Sub-national governments had to adjust, within the fiscal consolidation of Spain
On the revenue side, some margin to increase ceded taxes and the income tax tranche: some historical evidence points to the fact that the regulatory power was not used to a large extent in the past (frequent changes in center-regions financial arragements)
On the spending side: adjustment mainly in consumption expenditure
(education and health) and public investment
Departamento de Coyuntura y Previsión Económica
-10
-8
-6
-4
-2
0
2
4
6
8
2009 2010 2011 2012 2013
Sub-national government employees (LFS)
Central government employees (LFS, excl. SS)
% growth
-20
-15
-10
-5
0
5
10
2009 2010 2011 2012 2013
Pharmaceutical spending (nominal)
% growth
-80
-60
-40
-20
0
20
2009 2010 2011 2012 2013
Sub-national government investment
% growth
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
8
Nevertheless, despite the fiscal policy reaction, exposure to markets/fiscal vulnerabilities increased (financing needs)…
Departamento de Coyuntura y Previsión Económica
AND
CLM
CAT
VAL
MAD-5
5
15
25
35
45
55
65
-1.5 0.5 2.5 4.5 6.5 8.5 10.5
Sh
ort
te
rm /
Lo
ng
te
rm d
eb
t
Financing needs as percent of GDP
Total debt as a percent of GDP in 2007
AND
CLM
CAT
VAL
MAD
-5
5
15
25
35
45
55
65
-1.5 0.5 2.5 4.5 6.5 8.5 10.5
Sh
ort
te
rm /
Lo
ng
te
rm d
eb
t
Financing needs as percent of GDP
Total debt as a percent of GDP in 2011
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
9
Short-term reaction (beyond fiscal restraint): improvement in institutions (governance) and financial assistance Governance / fiscal rules
Budgetary sustainability Law (develops Constitutional reform of end-
2011): supervisory rules for sub-national govnt’s
In place since mid-2012
Detailed pre-emptive and corrective actions (“Economic and Financial
Plans of CCAA”)
Transitory period till 2020
Transparency: quarterly/monthly NA fiscal data for sub-national govnts
Independent Fiscal Responsibility Authority (yet to be operative)
To reinforce surveillance on all public administrations, and in particular
sub-national ones
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
10
Short-term reaction (beyond fiscal restraint): improvement in institutions (governance) and financial assistance
Financial assistance to cope with two main problems: (i) mounting levels of
“commercial debt”; (ii) liquidity-raising problems (market access)
Departamento de Coyuntura y Previsión Económica
AND
CLM
CAT
VAL
MAD
-10
10
30
50
70
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Ce
ntr
al G
ov. s
up
po
rt f
un
ds
, %
of
de
bt
Financing needs as percent of GDP
Total debt as a percent of GDP in 2012
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
11
Policy actions with a medium-term bearing and open issues
Policy actions
Law on the control of commercial debt
Public sector expenditure review, including specific actions (CORA)
Reform of the Local administration
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
12
Policy actions with a medium-term bearing and open issues
Open issues
How to deal with heterogeneity
Heterogeneous fiscal policy reactions and adjustment?
Heterogeneous preferences of electorates as regards public spending?
Heterogeneous business cycles?
How to advance in fiscal co-responsibility:
Revision of financial arrangements between the central and the sub-
national governments
Departamento de Coyuntura y Previsión Económica
ADDITIONAL MATERIAL
ADDITIONAL MATERIAL
NOMBRE DEL DEPARTAMENTO 13
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN
SPAIN DURING THE CRISIS AND BEYOND
THANKS FOR YOUR ATTENTION
Departamento de Coyuntura y Previsión Económica
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
14
Additional slide: heterogeneity in business cycles
Departamento de Coyuntura y Previsión Económica
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NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
15
Additional slide: heterogeneity in public deficit targets?
Departamento de Coyuntura y Previsión Económica
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-0.50
0.00
0.50
1.00
1.50
2.00
2.50
-0.50 0.50 1.50 2.50
De
fic
it J
an
ua
ry-N
ove
mb
er
2013
Deficit target for 2013
Andalucía
Islas Baleares
Cataluña
Murcia
Valencia
Comunidades sin PEF
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
16
Additional slide: heterogeneity in public deficit targets?
Departamento de Coyuntura y Previsión Económica
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NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
17
Additional slide: system of financial arrangements central gov. – regional govs.
Departamento de Coyuntura y Previsión Económica
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Sistema de
financiación
anterior
Aportaciones
adicionales del
Estado Nuevo sistema de financiación de CCAA
Fondo Sanidad
Fondo Sanidad
25% Impuestos
cedidos
normativos
Nuevas
aportaciones
Estado de
Bienestar
25% Impuestos
cedidos
normativos
Fondos de
Convergencia
Fondos de
Convergencia
Fondos de
Convergencia
Fondo de
Garantía
Fondo de
Suficiencia Global
Impuestos
cedidos
normativos
Fondo de
Suficiencia Global
Nuevas
aportaciones
Estado de
Bienestar
Fondo de
Garantía
Fondo de
suficiencia
75% Impuestos
cedidos
normativos
Criterio de reparto: población ajustada
Según criterios de reparto
Garantía de statu quo inicial
NOMBRE DEL DEPARTAMENTO
FISCAL CONSOLIDATION AND FISCAL DECENTRALISATION IN SPAIN DURING THE CRISIS AND BEYOND
18
Additional slide: decentralization of spending in 2012
Departamento de Coyuntura y Previsión Económica
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Imp. sobre la producción y las importaciones
Imp. corrientes sobre la renta y
el patrimonio
Subvenciones Remuneración de asalariados
Consumos intermedios
Transferencias en especie
Formación bruta capital
(P5=P51+P52)CCAA CCLL
AC SS