Madrid, Catalonia play down secret talks on independence

The Spanish prime minister and Catalonia's regional leader met secretly last week to discuss improving Catalonia's fiscal deal with Madrid in exchange for easing off its independence bid.

Spain’s central government and its secessionist-minded economic motor Catalonia hardened their positions Wednesday after a discreet attempt to renegotiate the region's fiscal deal with Madrid went nowhere.

It emerged last week that Prime Minister Mariano Rajoy and Catalonian regional leader Artur Mas recently met to discuss the possibility of restructuring Catalonia's fiscal pact with Madrid – enabling the state to send less of its GDP to the federal government and ease its own recession woes – in exchange for the state dropping its plans to pursue a referendum on Catalonian independence.

But today, speaking at separate events, both men played down the possibility in comments that appeared to be directed to their respective power bases and to preempt internal divisions in their support.

Rajoy focused on economy

Mr. Rajoy, addressing leaders of his Popular Party (PP), showed no signs of budging on Catalonia’s demand for a significant renegotiation of its fiscal relation to the central government. He also asked for more loyalty from his party when it comes to efforts to negotiate a deal with regional governments, in the clearest sign yet that the government is under intense pressure from internal dissent.

Rajoy, who was addressing PP barons, demanded “internal cohesion and unity,” which described that as core to his party’s identity, especially when it comes to letting the government negotiate with other regions. That was a clear reference to Catalonia’s secessionist challenge and the growing public criticism of PP hawks of what they perceive as weakness from Rajoy.

“We will continue listening to everyone, those in my party and those outside, because that is my duty, even if some appear not to understand that,” Rajoy said.

Rajoy didn’t specifically mention Catalonia, but he reiterated he is willing to talk about renegotiating fiscal conditions with the largely autonomous regional governments. He warned, however, that the priority is Spain’s broader economic crisis.

Catalonia’s economy is the size of Portugal’s, but markets have long shut it out as its deficit increases. In 2012, the deficit was equal to nearly 2 percent of its gross domestic product. The central government has bailed out Catalonia several times.

Mas committed to independence referendum

Mr. Mas, during a review of the first 100 days of his current administration, reaffirmed the commitment of his party, CiU, to the current pro-independence coalition. Though he raised doubts about the coalition's survival – while they are both pro-independence, CiU and its coalition partner, the radical left ERC, differ on their economic policies – he insisted his government will not alter its plan to seek a referendum on seceding.

In his speech Mas tied the region’s economic policies – including a new fiscal pact with Madrid – to pursuing the Catalonian parliament-approved path toward a referendum. Mas said talks with the central government could lead to a more flexible deficit terms that require the Catalonian government to cut an additional 4 billion in spending, although he suggested he couldn’t trust the government to keep its word.

“We talked about the [referendum] but there is no other agreement other than to keep talking,” said Mas during his address to the Catalonian parliament, in reference to his secret meeting last week with Rajoy.

In effect, Mas is betting his political survival on preserving his pro-independence coalition long enough to stabilize the region’s economy, or else face the third regional elections in less than two years amid his government's growing unpopularity and without the unifying nationality issue.

Mas said his government’s coalition was based on defending Catalonia’s right to hold a referendum, with or without Madrid’s permission. But his government is growing weak as a result of the region’s dire economic shape, its unsustainable fiscal deficit, and Spain’s most severe austerity measures. The ERC has said it will not necessarily support his economic policies.

“Nobody knows what will happen. I want this government to last the four years it’s supposed to. But things could change on short notice,” Mas said.