Catalan nationalists threaten to block Spanish PM’s key economic package

The fragile government of Spanish socialist Pedro Sánchez faces its first test of the year as one of his Catalan nationalist allies threatens to turn against him and block a key package of economic measures.

Mr Sánchez formed his new administration in November, despite having lost a summer election. His left-wing coalition received the parliamentary support of several nationalist parties, including the hardline Together for Catalonia (JxCat), which in exchange demanded a controversial amnesty law that would benefit hundreds of separatists facing legal action.

That deal will be under scrutiny on Wednesday, with the Madrid parliament due to vote on whether to extend a number of government measures aimed at countering the impact of price rises over the last two years, including tax cuts on food staples and public transport subsidies. Other measures include the protection of vulnerable families from eviction and the gradual lifting of tax cuts on energy bills to keep inflation down.

The approval of €10 billion in EU recovery funds are contingent on the package going through. With Mr Sánchez commanding only a narrow majority, its approval has been cast in doubt due to resistance by JxCat, which has seven members of parliament.

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“The seven votes of JxCat are not a blank cheque and they should serve to improve the wellbeing of Catalans,” said Josep Rius, spokesman for the nationalists.

JxCat has proposed several amendments to the measures. The most noteworthy seeks to ensure the return of thousands of companies that moved their tax base out of Catalonia because of the political turmoil surrounding a failed secession attempt by the region in 2017. The conservative Spanish government during that crisis introduced incentives for firms to move their base to other parts of Spain and, according to El País newspaper, more than 5,000 did so.

“What we propose is to incentivise the return of those companies, so they can receive tax benefits,” Mr Rius said. “And those which do not [return] but which have most of their activity in Catalonia would face sanctions.”

The amnesty law that Mr Sánchez’s Spanish Socialist Workers’ Party (PSOE) has presented to parliament has angered many unionists, who see it as an unconstitutional concession to Catalan nationalism. The law must be approved by deputies and overcome legal obstacles before it is implemented, possibly later this year. Among its potential beneficiaries is Carles Puigdemont, the figurehead of the 2017 independence drive who has been living in Belgium to avoid Spanish attempts to put him on trial and who is the most prominent figure in JxCat.

With fewer than 24 hours left before the vote on the economic package, the government would not be drawn on whether it was willing to consider the proposal to offer incentives to companies that returned to Catalonia and punish those that did not.

[ Pedro Sánchez faces challenge in 2024 to keep fragile majority together ]

“We always ensure the maximum possible judicial security for our companies,” said government spokeswoman Pilar Alegría. However, PSOE spokesman Patxi López said his party was looking at ways “to ease the return of the companies” to Catalonia.

Business leaders have voiced concern. The chairman of the Spanish Confederation of Business Organisations (CEOE), Antonio Garamendi, said the JxCat proposal was “intravenous regulation, or you could call it communism”.

The conservative opposition Popular Party (PP), which has been fiercely critical of Mr Sánchez’s willingness to engage with JxCat and other nationalists, has also attacked the idea. The PP leader in the Andalucía region, Juan Manuel Moreno, warned that the wrangling over the economic measures would be repeated throughout the legislature and that “Mr Puigdemont and other pro-independence parties will constantly blackmail the Spanish government”.

However, the PP has suggested that it might end up abstaining in the parliamentary vote in order to ensure that some of the measures are approved.

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