- The Cabinet Committee for Economic Affairs gave the Catalan president 48 hours to freeze non-essential spending.
- The State will pay fundamental public services directly once the Catalan government certifies its outstanding expenses.
- Banks must require a certificate from the Comptroller General for any payment by the Catalan government.
On 15 September 2017 the Council of Ministers received a report from the Finance Minister and, immediately afterwards, the Government’s Delegated Committee for Economic Affairs approved new financial control measures over Catalonia. According to the official note, they respond to the Catalan government having breached the conditions set in July. They came into force the day after their publication in the official gazette, which took place on 16 September.
The agreement gives the Catalan president 48 hours to approve a non-availability agreement covering any spending not linked to fundamental public services. In addition, the State will not send new transfers to the region to pay for those services: it will pay them directly once the Catalan government certifies all its outstanding expenses.
What changes in payments
The agreement is sent to credit institutions so that they do not collaborate with illegal activities and so that they require every payment by the Catalan government to be accompanied by a certificate from the Comptroller General. If they detect any irregularity, they must report it to the public prosecutor. In addition, all borrowing by the Catalan government, even short-term, will need prior authorisation from the Council of Ministers.
According to the Government, the Catalan government had sent weekly the communications it was required to send after the July agreement, despite having filed a contentious-administrative appeal against it, until that same week its comptroller general and vice-president said they would stop complying with those conditions. The central Government presents the measures as a response to protect the general interest and guarantee public services. In principle, the measures are aimed at the Catalan government’s own payments and not at the accounts of companies and citizens.
Effects on suppliers and companies
For those who work with the Catalan administration, the main risk is delayed payment. Suppliers of fundamental public services, such as health, education or social services, are those the State would pay directly under the agreement. For other spending, payments may be conditional on additional certifications or on approval of the non-availability agreement. For a supplier, the practical rule is to document each delivery or service as clearly as possible, so that the invoice can be certified without dispute.
Banks, for their part, must review their procedures: require the certificate, report irregularities to the prosecutor and avoid collaborating with payments that do not meet the requirements. In a heavily regulated financial system, compliance with these obligations is part of operational risk, and the clarity of procedures is as important as the measures themselves.
What to review
If your company invoices the Catalan government or entities in its public sector, it is worth reviewing current contracts and payment terms, the age of outstanding invoices and the exposure of your cash position to a prolonged delay. Discuss with your adviser the financing options, such as invoice discounting or factoring, and the terms of each, because they are not the same in cost or in recourse. It also helps to keep in regular contact with the departments that commission the work and to keep proof of acceptance of each delivery.
For companies in other sectors the consequence is indirect: a possible effect on regional economic activity and on confidence. It is prudent not to jump to conclusions, to follow official communications and to avoid irreversible decisions based on rumours. Events are moving quickly and the applicable rules may change, so always check them against official sources. If your business depends heavily on one public-sector client, this is a good moment to consider diversifying customers in the medium term.
In a changing environment, cash flow and collection records are a company’s best protection.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
