Spanish leader warns Catalonia over fiscal autonomy drive

Prime Minister Mariano Rajoy warned Catalonia on Wednesday not to “persist in error” in a fight for fiscal independence from the rest of crisis-hit Spain.

A week after Catalans flooded Barcelona in a pro-independence rally of 600,000 to 1.5 million people, Rajoy bristled at the northeastern region’s growing campaign to levy and spend its own taxes.

“The worst thing is to persist in error and then take the wrong decisions,” Rajoy told parliament on the eve of a highly publicised meeting with Catalonia regional president Artur Mas.

Mas, head of the pro-autonomy Convergence and Union alliance, wants an answer from Rajoy to his “fiscal pact” demands.

The Catalan chief stepped up the pressure on Spain’s premier by signing a tax cooperation agreement with Catalan local authorities on Wednesday and describing the deal as the “embryo” of a Catalan tax ministry.

But “this is not the time to create more problems or political instability,” said Rajoy, who is struggling to convince his eurozone partners that he can fix Spain’s rocky finances and avoid a full-blown bailout.

“As political representatives we have a greater responsibility and I think we have to be very careful of what we do, what we say and also where we’re going,” the Spanish leader warned.

“If we get it wrong and go too far, and if things get out of hand, we should not allow ourselves to be led by events,” he said, alluding to the stirrings for Catalan independence.

Fiercely proud of their distinct language and culture, Catalans increasingly feel they are getting a raw deal from Madrid.

Last month, the region reached out for a 5.0-billion-euro ($6.3-billion) central government rescue so as to make repayments on its 40-billion-euro debt, equal to a fifth of its total output.

But Catalonia, which accounts for one-fifth of the Spanish economy, says it pays the central government far more in taxes than it receives in return: a deficit of seven to eight billion euros a year.

“Catalans have a lot of problems as do the citizens and other regions in Spain,” Rajoy said.

“What we cannot do is to blame everything that happens on everyone else, nor create political instability by taking the wrong decisions.”

Spanish King Juan Carlos released an open letter on Tuesday lamenting the country’s economic pain.

“The worst thing we can do is to divide our forces, encourage dissension, chase pipe dreams, deepen wounds,” the king wrote, in remarks widely interpreted as a warning to Catalonia.

Spain’s provinces gained a large degree of autonomy, including reponsibility for health and education, after the 1975 death of General Francisco Franco who had centralized power in Madrid.

Some regions fear Rajoy’s conservative Popular Party may erode those hard-won powers during the economic crisis, for example by overseeing the finances of those that fail to meet deficit-cutting targets.