Spain’s Federal Experience (A work in progress) Violeta Ruiz Almendral Professor of Tax and Finance Law Universidad Carl

1. Spain’s Federal Experience (A work in progress) Violeta Ruiz Almendral Professor of Tax and Finance Law Universidad Carlos III de Madrid, Spain Forum of Federations

2. One culture…?

3. Or many…?

4. The Spanish tradition of centralized government • XV century: unification by marriage of the Kingdom of Castilla with the Kingdom of Aragón (which includes Aragón, Catalonia, Balearic Islands and Valencia) • XV and XVI: expansion of Spain (“discovery” (conquest!) of America, etc.) • XVIII: King Felipe V, with the so-called “Decretos de Nueva Planta,” abolishes the political and administrative autonomy of Aragón, Catalonia, Mallorca and Valencia, with the purpose of centralizing and unifying political power (specially painful for Catalonia) • The three provinces of the Basque Country and of Navarra survived this centralizing attempt by the Spanish kingdom (until Franco)

5. The Spanish tradition of centralized government • Short “federalist” experiences: • XIX: First Republic, 1873 Constitution (disaster) • XX: Second Republic, 1931 Constitution (1936-1939 Spanish civil war)

6. The civil war divided Spain

7. Leaving many dead (1 million)

8. And a (fascist) Dictatorship

9. The Spanish Transition: from Dictatorship to Democracy • 1939: Franco wins the civil war, dictatorship starts • 1975 (november 20th): death of Franco. Transition starts • 1977: first general elections • 1978 (december 6th): Constitution is approved • 1981 (february 23rd): Coup d’État. Fails. Demostrations all over Spain • 1982: Socialist party wins with absolute majority.

10. Transition starts

11. But Democracy is still feeble: 1981 (february 23rd): Coup d’État

12. 1981 (february 23rd): Coup d’État; the role of the King

13. The Spanish Transition: from Dictatorship to Democracy • Dynamics of the process: no major breakthrough, no major change: a “legal revolution”…two elements: • 1) FORMAL ELEMENT: • The existing legal framework, the set of laws and orders that had been approved under the Franco regime, were respected and taken as a departure point. • 2) MATERIAL ELEMENT: • The will to achieve a maximum degree of consensus among Spain’s diverse political and social forces.

14. The Spanish Transition: from Dictatorship to Democracy • The special relevance of the “constitutional consensus”, achieved in two arenas: • (1) “Moncloa Accords”, government, political parties, trade unions and business associations pledged to guarantee social harmony and economic stability. • (2) Ratification of a Constitution which established a balance among the demands of the diverse groups involved, finding formulas for transaction

15. Eleccions in Spain • 1977 First general elections • 1978 Constitution • 1981 Coup d’Etat (unsuccesful) • 1982 Socialist party absolut majority • 1996 People’s Party (2001, People’s party absolute majority) • 2004 Socialist party

16. The Spanish Constitution • Bill of rights • Protection of the rights (Constitutional Court) • Social rights • Division of powers

17. The transformation of the Spanish society

18. A revolution in many senses 1980: NO WOMEN IN POLITICS

19. A revolution in many senses Present government: 50% WOMEN

20. The Spanish Transition: the role of the European Union • Major institutional catalizer • Financing • Revolution of the legal system • Towards a double federalism?

21. Why Decentralize Spain? • Decentralization as a means to attaining democracy • Some Communities had seen their autonomous aspirations thwarted by the war (Catalonia, Basque Country, Galisia) • Others agreed that a certain level of autonomy was necessary, to help them protect their differences (Valensia, Canary Islands, Andalusia…)

22. Why Decentralize Spain? • Fear of a unitary State being easier to turn back to being a Dictatorship; dividing power to ensure democracy and a checks a balance system • Want to accomodate different needs, different situations

23. Why Decentralize Spain? • Differences in tastes for public goods and services arise out of differences in history, culture and language across regions of a country • Differences among regions in their capacities for public administration • Nationalist sentiments

24. What did citizens think? • Great division of opinions • Explains why Autonomous Communities started off being service providers, without levying taxes

25. What were the options? • Regional system(Estado integral): large central nucleus and two or three autonomous regions with their own governments, parliaments and legal and jurisdictional powers. • Federal system: same powers for all Communities • Both options were rejected

26. What were the options? • Regional system(Estado integral): too similar to the Second Republic’s (the right would not accept it) • Federal system: would not accomodate different sentiments; maybe not all parts of the territory wanted to become autonomous, maybe not all at the same level • Something new had to be invented…

27. The formation of the Autonomous Communities • Final solution: asymmetric federalism, federalism á la carte, cheese platter federalism… • Form of the State not defined in the Constitution of 1978 • Guarantee of autonomy: “the Constitution is grounded on the indissoluble unity of the Spanish Nation...and guarantees and acknowledges the right to autonomy of its regions” (section 2)

28. The formation of the Autonomous Communities • Being an Autonomous Community is an option • Procedural framework: provinces decide whether they want to became a Community and what authority they want to take on.

29. What are the “provinces”?

30. The Statutes of Autonomy • Basic institutional rules of each Community • At the same time: part of the State’s legal system • Statutes must contain: • The name of the Community • Its territorial boundaries • The name, organization and seat of its own institutions • The powers assumed within the framework laid down by the Constitution and the basic rules for the transfer of the corresponding services

31. The functioning of the Autonomous Communities • No total separation of authority (dual federalism), but rather shared competencies (cooperative federalism) • The Constitution does not assign explicit authority to ACs, they choose over a group of matters listed in the sections 148 and 149

32. The different levels of authority: fast and slow lanes

33. Closing clauses: residual powers (not automatic) • Section 149.3 “Matters not expressely assigned to the State by this Constitution may fall under the jurisdiction of the Autonomous Communities by virtue of their Statutes of Autonomy”

34. Closing clauses: paramountcy Section 149.3 (cont.) 2) Jurisdiction on matters not claimed by the Statutes of Autonomy shall fall with the State, whose laws shall prevail, in case of conflict, over those of the Autonomous Communities (except for those matters in which exclusive jurisdiction has been conferred upon them) • 3) State law shall in any case be supplementary of that of the Autonomous Communities

35. The formation of the Autonomous Communities • Seven regions would immediately attain the higher degree of autonomy (Catalonia, Galicia, the Basque Country, Andalusia, Valencia, the Canary Islands and Navarre • The other ten chose the lesser degree of autonomy

36. País Vasco Cantabria Navarra Asturias Galicia La Rioja Cataluña Castilla-León Aragón Madrid Valenciana Castilla- La Mancha Extremadura Baleares Murcia Andalucía Canarias Legend Common Regime – HighResponsibility Common Regime – Low Responsibility Foral Regime Regime

37. The formation of the Autonomous Communities Different quantitative weight of slow and fast laners

38. Evolution of decentralisation of public expenditures (% of participation of total public expenditures)

39. An asymmetric system? • Intrinsecal asymmetry of the system • This asymmetry is both de facto and de jure and explains the role played by political agreements • Coordination and cooperation are key

40. The functioning of the Autonomous Communities • The Constitution bestows special functions to the State, to guarantee coordination, unity within autonomy, solidarity… • For example, ‘regulating the basic conditions to ensure the equality of all Spaniards in the exercise of their rights and the fulfilment of their obligations’ or the ‘coordination of the economy’

41. How can a Community obtain (additional) new authority? • Constitutional reform • Reform of the Statutes of Autonomy (sec. 147) • Delegation or transferral of new authority (sec. 150)

42. Fiscal Federalism in Spain (also a work in progress)

43. What the Constitution says… • The right to financial autonomy of Autonomous Communities: • Section 156.1: • “The Autonomous Communities will have financial autonomy for the execution of their authority, following the principles of coordination with the State´s Treasury and solidarity among all Spaniards”

44. What the Constitution says… • Section 157.1: “The Communities’ resources will be the following...: • - Taxes ceded by the State, surtaxes on State´s taxes and other of the kind. • - Their own taxes. • - Transfers from an Interterritorial Equalization Fund • - Yield from their capital resources • - Public Debt

45. In practice, asymmetry: two financing systems: • The “foral” regimes • Broad taxation powers • Payments to the central State (cupo) • The “common” system • Limited taxation powers • Receive transfers from the central State based on need • Different levels of authority, different needs

46. The functioning of the Autonomous Communities: the institutional framework

47. What the Constitution says • The Constitution allows the State to control ACs in some cases (eg Sections 150.3, 153 and 155).

48. What happens in practice… • Instead, the numerous conflicts have been solved – or are in the process of being solved – through politically negotiated agreements, and the Constitutional Court • PROBLEM: excessive role of the Constitutional Court in solving conflicts

49. The role of political agreements • Advantages: • They promote cooperation • Sometimes the only solution when authority is shared • Disadvantages: • Bargaining attitudes • Different political weight of Communities

50. The role of political agreements • Solutions? • Reform of the framework within which agreements are reached (Senate, permanent conferences) • Clear definition of playing rules