WRITTEN QUESTION E-1655/01

by Pere Esteve (ELDR) to the Commission

(12 June 2001)

Subject: Double fiscal deficit in the Balearic Islands

According to recent reports presented in the regional parliament of the Balearic Islands, Spanish government revenue in the region in 1999 stood at PTE 875 047 million, while national government expenditure was PTE 570 873 million. The fiscal deficit of the Balearic Islands vis-à-vis the Spanish state was, therefore, PTE 304 174.

In only 17 years, the fiscal deficit of the Balearic Islands vis-à-vis the Spanish state has increased from PTE 7 500 million in 1981 to PTE 304 374 in 1998.

The region also contributes an annual average of PTE 32 081 million to the EU budget. It is in fact the Spanish region which contributes most per inhabitant to the EU, although it gets only PTE 10 167 million back in EU aid. This amounts to a negative balance of PTE 21 940 million per inhabitant.

The Balearic Islands thus suffer from a double fiscal deficit vis-à-vis both Madrid and Brussels.

In view of these circumstances, what is the Commission's position on the double fiscal deficit affecting this region? Does the Commission believe that this deficit could be properly remedied by an appropriate distribution of EU funds? Does it intend to take any kind of measures to ensure that further fiscal imbalances are not generated in the present case?

Answer given by Mr Solbes Mira on behalf of the Commission

(31 July 2001)

Regarding the supposed fiscal deficit of the Balearic Islands (one of the Comunidades Autónomas) vis-à-vis the Spanish State, in principle this is an internal issue of Spain and only the Spanish authorities can deal with it.

The financial relationships between territorial governments (Comunidades Autónomas) and the State are based on the Constitution and the LOFCA (Ley Orgánica de Financiación de las Comunidades Autónomas). Within the legal framework of the LOFCA, an official body is responsible for negotiating agreements between the State and regional governments (Fiscal and Financial Policy Council). These agreements are revised each five years. The current system covers the period 1997-2001.

Regarding the supposed fiscal deficit in relation to the Community two remarks should be made:

- On the one hand, the most important Community spending items are agricultural expenditure and structural and cohesion funds. Their main goals are maintaining farmers' income, increasing the internal cohesion among Community regions and reaching real convergence among Member States. In accordance with these targets, a high percentage of total Community expenditure is addressed to those regions with lowest per capita income. The Commission considers this strategy, on which the current expenditure of these items is based, as appropriate.

- On the other hand, the financing of the Community budget is determined by the VAT resource, the gross national product (GNP) resource and the so-called own traditional resources. All these Community resources appear only as expenditure in the Central State budget. The financial links are established thus only between the Community and the Member State.

The Commission therefore cannot comment on calculations of fiscal balances such as those proposed by the Honourable Member.