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THE EURO ZONE

Unfair play

This week saw the Basque Country's president Iñigo Urkullu defending the region's special financial deal with Madrid. Known as the Cupo Vasco and hardwired into Spain's 1978 Constitution, this pact enables the northern region to collect its own taxes and choose how much money it returns to the Spanish government every year.

The Basque premier was not only responding to Ciudadanos' recent criticism of the Cupo Vasco - who have branded the deal “unfair and [against] the principle of solidarity” - but holding it up as the model for a “new decentralised system” for the rest of Spain. Implied in his remarks, of course, is the idea that giving Catalonia the kind of fiscal autonomy enjoyed by the Basque Country would go a long way towards defusing the tensions over Catalonian secession.

Urkullu argues that the Basque deal, which has just been renewed for another five years by Mariano Rajoy's government, ensures that a region has the resources it needs for public spending. This is guaranteed, he says, if you decentralise tax-control and allow regions to raise or lower taxes as they need to. And against the argument that doing so lays the legal basis for domestic tax havens, he says that the average tax burden in the Basque Country has been higher than in the rest of Spain since 1981. Urkullu also points out that the region pays 6.24% of state costs despite only accounting for 6% of the country's GDP.

The Basque premier's remarks go to the heart of the economic case for Catalonian secession. Separatists say that they want to divorce Spain because Catalonia - a wealthy region that accounts for a fifth of Spain's GDP - pays more to Madrid in taxes than it receives back for public spending. Never mind, for the moment, the dubious statistics often evidenced to support that claim. Or the frequently-made objection that economics is nothing but a smokescreen disguising political and cultural desires for secession. Leave those things aside for now, because the real question here is one of fairness.

Urkullu's argument for a “new and decentralised” approach to regional tax affairs in Spain deserves serious consideration - but only if what's being proposed is that all regions are given a similar deal. The rest of Spain will be justifiably furious if Rajoy is seen to be considering, as a UK newspaper recently suggested he is, giving something like the Cupo Vasco to Catalonia and only Catalonia.

In its outspoken opposition to the Basque arrangement, Ciudadanos - the centrist party now being billed as the leader of Spain's “pro-Constitution” camp - has drawn furious criticism. Predictably, its loudest detractors have been Basque politicians, who brand the party as promoting quasi-Franco nationalism. Hardly: all Ciudadanos has done is highlight the unfairness of a situation in which some regions have greater fiscal autonomy than others.