Spain. Breaking away from debt at a municipal level.

Ayuntamiento-Molins-Rei-declarado-ilegitima

Molins de Rei’s Council declares illegitimate part of its debt

Pablo Martínez & Iolanda Fresnillo, PACD Spain.

Hundreds of city councils all over Catalonia and the Spanish State are under financial hardship since the begging of the crisis. The debt of local corporations in the Spanish state has reached 67 billion Euros in December 2012, a rise in 230% since year 2000. Even though this comprises only 57% of the Spanish state’s public debt, this debt has a direct impact on the services provided by local governments to cover essential services such as education, health or social welfare policies, integration, equity and cooperation, as well as economic stimulation

More and more, the debate about the obligation to pay or not pay the debt is being considered by city councils. Recently the city council of Badalona has approved a motion that declares part of the municipal debt illegitimate. They were preceded by some city councils in the province of Valencia.

The financial drowning of the city councils has been caused by a deficient financing system and an unsustainable indebtedness. Adding to this, the political centralisation process (driven further by the Popular Party), is trying to diminish the power of local councils. Even though there is a clear shift of the local powers and competences to central government hands, thus separating them further from citizens and social control, there are still a number of aspects to exert pressure on in order to achieve changes at a the municipal sphere.

THE MUNICIPAL DEBT BUBBLE, REINFLATED

The debt of the municipalities went from 28,4 billion Euros in year 2000, to 46 billion Euros in 2007 and to 67.6 billion Euros by the end of 2012. A debt that, with the dramatic fall of income due to the building market crash, has become unpayable and has reverted to a lot of municipality services suppliers not being paid for months. Facing such a situation, the government of Mariano Rajoy promoted during the beginning of 2012 the Payment Plan for Suppliers. Through it, the central government agrees to a syndicated loan with the Official Credit Institute (ICO) and 26 financial institutions to be able to pay pending invoices. This is one of the mechanisms that banks, many of them rescued with public funds, use to invest the money lent by the European Central Bank (ECB) in loans to public administrations with a higher interest rate (around 5.9%) and therefore earning an important profit without assuming any risks, since the loan is guaranteed by the State.

Up to May 2013, five million invoices of provinces and local entities’ suppliers have been paid, in an amount of 28 billion Euros, of which 10 billion correspond to payments from local entities; but the municipalities’ debts have shot up again. The debt of local corporations in the Spanish State reached 67 billion Euros in December 2012. It is also interesting to highlight the fact that, even though the Payment Plan for Suppliers was presented as a solution for small and medium-size companies and self-employed entrepreneurs, about 60% of the amount paid were invoices from big companies such as Sacyr, FCC, ACC or Ferrovial, partly responsible for the spiral of the real estate speculation.

Regardless of the fact that one of the ICO’s aims is “sustaining and promoting financial activities that contribute towards growth and improvement of the distribution of national wealth”, this operation is another example of the socialization of losses and privatization of benefits.

The process of municipal citizen audits started by various collectives has hit a wall of opacity, not only with city councils but also with the ICO, that does not provide even basic information such as a detailed list of municipalities where their loans have been granted. Facing this situation, the Spanish Citizen Debt Audit Platform (PACD) has started submitting motions to different city councils in Catalonia and Valencia. These motions aim for the recognition of illegitimate debt, the temporarysuspension of payments and the development of citizen audits. The final goal is to obtain the nullity of the debts that citizens consider illegitimate.

The contradiction at the municipal sphere, like the in rest of the state’s institutions, is that civil society’s participation is not direct; it has to go through a political party that has representation in such institution. Social participation is limited, thus, to the possibility of demanding an oral intervention in a plenary session, that can be denied.

RECOGNIZING THE ILLEGITIMACY OF MUNICIPAL DEBT

Within this frame of reference, on June 26th the city council of Badalona approved a motion to declare illegitimate part of the municipality’s debt, with votes in favour from ICV-EUiA, PSC and CIU and the abstention of the PP.

The motion was prepared by the Citizen Debt Audit Badalona group (part of Badalona Indignada and the PACD) together with the local political group ICV-EUiA, who presented the motion. Badalona has thus become the first city of the Catalan region that acknowledges the illegitimacy of part of its debt. The motion makes explicit references to the interests paidunder the Payment Plan for Suppliers. The Plenary Council considered illegitimate “the interests contracted with the private financial corporations Caixabanc, CatalunyaBanc, Bankia, Banc Sabadell, CAM, Banc Santander, Banesto, Banco Popular, Bankinter, Caixa Espanya, Cajamar and BBVA for the capital of 31 million Euros leant under the 2012 Payment Plan for Suppliers with interests of 5.4% on public money that these financial corporations had obtained at interest rates lower than 1%”.

The case of Badalona is preceded by a small flood of motions submitted to city councils in the province of Valencia, also an initiative of the PACD, but integrated as a strategy by the political coalition Compromís. In this case, the motions for the citizen debt audit and the recognition of illegitimate debt were approved in Alcoi, Mur d’Alcoi, Vinalesa, Petrer and Picassent and denied in Alcúdia, Valencia and Alicante. In the cases of Alcoi, Vinalesa, Petrer or Picassent the coalition Compromís presented the motions without contacting the local groups of the PACD and, in some cases, eliminating the word “citizen” from the audit proposal. In the city of the Valencia, the PACD presented a new motion through Esquerra Unida on June 21st. Compromís had already submitted the text of the motion prepared by local groups of the PACD, without contacting them, and therefore the motion could not be presented through both political parties, as was intended.

The motion was rejected by votes against from the PP and the abstention of the PSOE. Following the same guidelines as Compromís, Izquierda Unida is presenting motions in various city councils in the province of Madrid, without making a gesture to work together with the civil society. During the month of March, the PACD local group in Alicante also presented a motion in the council plenary that was rejected with votes against from PP, PSOE and UpyD.

In Catalonia, CUP, also in contact with the PACD, submitted a similar motion in the city council of Vic that was rejected, while in Cerdanyola, the motion driven by ICV (identical to that which was approved in Badalona) was approved. It further denounces that the obligation to pay the debt because of the constitutional reform (agreed by PP and PSOE) causes “suffering to the citizens”. “Without this requirement, budgets destined to help people who suffer most from the crisis could significantly increased”.

Another motion, driven and approved by all parties in Molins de Rei, goes beyond that of Cerdanyola. The parties represented in the city council agreed to the preparation of an audit of municipal accounts to determine “the total amount of illegitimate debt”. This work will be done with the collaboration of the PACD.

More municipalities are expected to join this initiative in the autumn. ICV has already stated that it will present motions in all municipalities where it has representation. On the other hand, Molins de Rei’s plenary council promised to pass on their motion to associations of municipalities.

Municipalities, places of political transformation.

The municipality is the decision making space closest to the citizens and where, apparently, a higher control on political management can be exerted, as well as on management of debt. Furthermore, local transformation can have an effect on other political levels such as provinces, state or communitarian spheres.

The history of social and neighbourhood movements in achieving more transparency and participation at a municipal level comes from afar. During the years, the main parties have been forced to adopt a speech of citizen participation at a municipal level but, in spite of this apparent interest in participative management, there has been either no interest in effectively maintaining this participation or it has had no effect regarding the important decision-making processes. The same is true regarding access to information.

In many cases, the necessary intermediation of a political party in order to participate in managing key aspects of the municipality, such is the case with debt, carries a risk of appropriation and lack of participation. Political groups such as Compromís in Valencia or IU in Madrid take over the processes without even mentioning their citizen origins. Thus, political parties and coalitions adopt as their own breaking speeches and concepts such as illegitimate debt, but often without recognition or will to work together with civil society.

Municipal debt is one of the areas where the civil participation and access to information are restricted. The management of this debt is established by policies dictated by international institutions, the European Union and the central Spanish Government and is not open to citizens’ participation. Even more so, it is almost impossible for a citizen to access detailed information about the structure of debt, the types of interest rates or the creditors of a city council. This information is even denied to opposition parties’ representatives. At least it has been until now.

Authors

Share

2 thoughts on “Spain. Breaking away from debt at a municipal level.

  1. Pingback: Spain. Breaking away from debt at a municipal level. | Arquivos Democracia e Dívida

  2. Pingback: BARCELONA #15M Newsletter nr 49

Comments are closed.