Public Competition in Post-Independència Catalunya

Camp del Ferro

This essay examines how the art of public competition functions when one of its most important competitors is absent. The suspension of policy-making within the Generalitat de Catalunya, following the region’s failed bid for independence, provided an almost unique opportunity to observe the strategic processes and limitations of the art of public competition. The optimistic finances of metro line 9/10 set the context, followed by analysis of the reactions of the city and metropolitan area of Barcelona to the Generalitat’s hiatus. That analysis exposes vast differences in the funding models of higher and lower tiers of Spanish government, which can be traced to the availability of externally-financed debt.

“Public Competition in Post-Independència Catalunya” is the third in a sequence of four essays titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The first essay in the sequence establishes the policy context for the liberalisation of public transport in Spain. The second explores the workings of the art of public competition using the example of interurban buses around Barcelona. The final essay ponders the strategic interplay of risk, debt and optimism, using the example of Spain’s high speed railway network.

Beyond Line 9/10

Like many of Spain’s regional Autonomous Community governments, the Generalitat de Catalunya’s initial reaction to the 2008 financial crisis was to maintain many prior expenditure commitments by borrowing, with debts rapidly rising from a baseline of around 8% GDP to around 35% of GDP by 2014. Roughly half this borrowing now occurs through the nation of Spain, using a mechanism called the “Fons de Liquiditat Autonòmic” (Autonomous Liquidity Fund, FLA) which allows regional government to borrow on broadly similar terms as the parent country, and thus benefit from Eurozone rates, which in this period were close to 0%. FLA funds come at the cost of fiscal autonomy, since the autonomous community’s plans for debt reduction must be approved by the Spanish government. The other half of the debt is sourced directly, commonly from commercial banks, which in Spain have traditionally had a strong civic investment function. The biggest single debt within the Generalitat’s total is that of Ifercat, the Catalan agency tasked with new public transport infrastructure: 4 billion euros of debt, roughly 5% of the Generalitat total. Half Ifercat’s debt is owned by the European Investment Bank, a non-commercial EU institution.

Aside from a 45 million euro project to rejuvenate the Lleida-Pobla de Segur railway, a line historically notable as the epitome of politicised infrastructure, Ifercat’s only practical project was Barcelona’s Line 9/10 metro route. Over-ambitious from the outset, both technically and financially, the “longest metro line in Europe” followed an all too familiar pattern of costs spiralling out of control in an environment of inadequate risk management. Ifercat pursued increasingly desperate funding mechanisms to keep their project alive in the face of the worst global financial crisis in a generation. Instead of using the private sector to mitigate construction risk, or using the private sector to deliver the desired transport system as a single build-and-operate concession, Ifercat sought short term liquidity simply to keep construction underway. And ultimately the money still ran out, leaving an incompete tunnel right in the middle of the route – a tunnel which is still inhabited by a pair of Tuneladores (TBMs) that haven’t moved since 2011. Such an incremental approach to funding inevitably led to poorly structured debt, notably creating many “hidden” liabilities, above and beyond the headline of 4 billion euros.

In 2014 Independents de Qui attributed Ifercat with another 1.8 billion euros of future guarantees to public companies, but that value transpires to be a fraction of the total additional liabilities: Between 2008 and 2010 batches of Line 9/10 metro stations were sold as 30-year concessions, typically to consortia of those companies building the stations, with the money raised by the sale ostensibly used to keep paying the builders to build those stations. The concessionaires levy an annual charge for providing and maintaining their stations – totalling around 250 million euros annually, an anticipated 7.6 billion euros in total. That figure seems infeasibly high, equivalent to the fare revenue of the entire Barcelona metro system. For context, in 2016 (including the first 10 months of passenger service to the airport) Line 9/10 conveyed just 4% of all metro passengers. The exceptional cost of these concessions is partly explained by concessionaires funding their initial purchases through commercial banking – the rates of such loans were inevitably less favourable than the Generalitat might have achieved itself, had it been able to raise the money through the FLA. This difference was accentuated by the political vacuum in the wake of the Catalan independence process: FLA finance reflected the overall stability of Spain, while the commercial loans of the concessionaires reflected the future ability of the Generalitat to pay the concession fees: Not only was the Generalitat less politically stable (and thus more risky) than Spain overall, but its Line 9/10 concessionary payments were somewhat less integral to the institution of the Generalitat, hence more risky, than Spanish bonds to the nation of Spain. Concessionaires consequently found themselves unable to refinance their debts, adding to the overall precariousness of the Line 9/10 finances.

Operator “Ferrocarril Metropolità de Barcelona”, Transports Metropolitans de Barcelona’s (TMB) metro, also carries a significant burden – in so far as it clearly identifies in its accounts, 75 million euros annually for leasing trains and a further 53 million in Line 9/10 “fees”. The lease presumably includes all the 9000 Series trains built for Line 9/10, in spite of only 28 out of 55 trains currently operating there, so presumably only half of the lease cost should be apportioned to Line 9/10, giving a total of 90 million euros annually. As documented in Interurban Buses in Public Competition, TMB‘s budget is managed through ATM, which is funded from roughly equal parts fares revenue and government support, with about half of that government support coming from the Generalitat. Such accountancy primary serves to shift the Generalitat’s past capital budgetary excesses into the current revenue stream, and in the process makes TMB’s metro look far more dependant on government support than it would be if it hadn’t been saddled with Line 9/10. That arrangement surely serves wider political agendas, but as we shall highlight later, TMB metro’s dependency on the Generalitat is broader than just Line 9/10.

Belatedly Ifercat (as the Generalitat de Catalunya) has been reduced to barter, trading land with the Ajuntament de Barcelona (the city government) to raise the money to complete a handful of stations on the Zona Franca branch. Line 9/10 was the final grand project of Jordi Pujol, who dominated Catalan politics through the “Olympic” Golden Age of the 1980s and 90s. However, post-Crisis, the Pujol agenda of grandiose (“pharaonic”) Catalan ambition evolved into a quite different hope of Catalan Independence, and for Pujol’s successors Line 9/10 became a slightly unnerving ghost from the past – albeit one still pending the traditional Spanish political exorcism called the corruption trial. The post-Referendum political hiatus in the Parlament de Catalunya stalled even the fig leaf of a new bid to the European Investment Bank for another 750 million euros to complete the central section of the line. However judging by his subsequent media appearances the holder of that fig leaf, Ricard Font, who is a common thread between many government transport interests within Catalunya, was not idle following the Generalitat’s fall from grace in November 2017. And he was not alone.

Herein lay the shifting sands of post-Independència Catalunya, an administrative void hitherto controlled regionally by the Generalitat, suddenly contestable, perhaps for the first time since the 1970s. While it is convenient to categorise the exercise of power through discrete organs of state, it is common for leading individuals to serve in many organisations. Indeed it is common for such individuals to shift between political, administrative and academic functions throughout their careers, in a way that, for example, the British civil service would not tolerate. It is therefore more instructive to understand the role of these individuals as an extension of Catalan society. Catalunya’s administrative institutions strongly reflect Catalan society, not least because they require their staff to be able to communicate in Catalá – which is not widely spoken outside Catalunya, so (for better or worse) affords substantial protection. At its higher echelons, Catalan society is virtual – where being seen to, to be in control of, these are the rewards – a monetary salary is almost incidental. The longer the Generalitat remained paralysed, the less important its civil service positions became within Catalan society, regardless of whether wages continued to be paid. And thus perhaps without even analysing their motivation, senior individuals within the Generalitat logically sought somewhat similar roles through other institutions. Given the pre-existing tendencies to switch and accumulate roles, their search was perfectly intuitive. That starts to explain why this sequences of essays is subtitled the art of public competition: For what at first looks like a power battle between institutions is far more subtle, far more human – and that in turn makes it harder to analyse and understand from an external perspective, especially an objective one.

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The Moral of Sovereignty

Blanket Coverage

“The Moral of Sovereignty” is the fifth essay in a sequence that explores the current Catalan independence process. The first essay introduces The Act of Referèndum. The second, on hope, 1714 and All That. The third, Patria and Patrimonio, on state. Absolute Devolution, the fourth essay, on power. This essay characterises condominium.

“Spain tells UK not to lose its cool”, glanced the Guardian. “UK accused of losing cool … by Spanish minister”, gawked the BBC. “Spain taunts Britain for losing its composure”, glared the Sun. In the “Did you spill my pint?” prelude to the perennial pub brawl that is Gibraltar, only the reasonable protagonist, Spanish foreign minister Alfonso Dastis, had reason to be confused. Lord Howard’s evocation of Margaret Thatcher’s military defense of the Falklands (Malvinas) hardly evoked the reasonable tone with which Spain had become accustomed to dealing with its European partners. A tri-century grievance born of the same succession war as 1714 and All That. A rock whose thirty thousand residents remain fiercely loyal to both Britain and Europe. And now a very particular problem for Brexit, the United Kingdom’s anticipated exit from the European Union.

Gibraltar is reasonably considered a colony within the European Union because its territorial status as a British Overseas Territory is shared with an array of small colonial outposts, all internally autonomous but reliant on United Kingdom foreign policy. Unlike the Crown Dependencies (Isles of Man, Jersey and Guernsey – those within the broad definition of the British Isles, but not the United Kingdom), Gibraltar is not part of the European Union Customs Union, but is part of the European Union: Gibraltar shares its European Union membership with the United Kingdom, although Gibraltar’s autonomy means European directives have to be specifically passed by Gibraltar’s legislature. Such a complicated arrangement, for so few people, inevitably perpetuates its own exception – an exception the likes of which that none could reasonably establish afresh. The United Kingdom’s Brexit thusly also applies to Gilbratar, regardless of the will of the people of Gibraltar. While colonial status implies a genuine claim to self-determination, and hence a theoretical return to Europe as an independent state, that would force an almost impossible choice on Gibraltarians, apparently between Britain and Europe.

In 2002 the British government attempted to resolve Spanish claims by proposing the shared sovereignty, condominium, of Gibraltar. The concept was not so unfamiliar to Spain, even if the only territory it currently shares (on a six month rotation with France) is a small uninhabited island in the Bidasoa river. Catalunya’s Pyrenean borderlands contained several oddities: Andorra’s sovereignty was shared after 1278, albeit as a suzerainty – a vassalage offering tribute to both the Count of Foix (later France) and the Bishop of La Seu d’Urgell (later Spain). The arrangement effectively lasted until the French revolutionaries of 1793 renounced their share, although Andorra wasn’t admitted to the United Nations, and thus definitively sovereign, until 1993. A similar conflict was resolved differently in Val d’Aran, which in 1313 swore fealty to the Crown of Aragon (later Spain) in return for the valley’s local autonomy – an agreement that held until 1834. And again for Cerdanya, which was partitioned by the 1659 Treaty of the Pyrenees to leave Llívia (the ancient capital of Cerdanya) surrounded by France – albeit only a mile from the principal bordertown of Puigcerdà, and thereafter a tough border to enforce. All three examples were defined by the disagreements of surrounding dominant sovereign powers, but in each case the actual outcome was locally pragmatic, as befits the reality of Pyrenean geography. Such pragmatism acknowledges the de facto, the situation in fact or in practice: For example, an Aragonese monarch may have had a de jure (in law) claim on Val d’Aran, but since the valley was inaccessible from the south during winter, de facto Val d’Aran functioned with a degree of autonomy, and it was eminently sensible to acknowledge that reality.

The idea of shared sovereignty for Gibraltar was overwhelmingly rejected in a referendum, ostensibly because Gibraltarians did not wish to be “Spanish” – a view thus far unchanged by Brexit. Spain may justifiably be considered the enemy, but this is primarily a de jure fear. De facto, Gibraltar is strongly influenced by adjacent areas of Andalucía: 12 million people visit Gibraltar each year, daily visitor numbers roughly equal to the entire resident population, indicative of high economic and social inter-dependence. Likewise, Gibraltarians are far more culturally mixed than their British colonial status may imply, as likely to carry a British name as a Spanish name. Gibraltar’s “Britishness” is necessarily overstated to foster cultural unity – a direct reflection on the contemporary dominance of sovereign power, that the pragmatism of local coexistence is so readily overwhelmed by the power structure of national authority. So while a British-Spanish condominium would reflect the local character of Gibraltar, the very involvement of such sovereign powers now renders the feudal pragmatism of the Pyrenees impossible.

The rejection of shared sovereignty reflects a wider trend in international law, where condominium has become the exception for the awkward cases, not the norm: Deployed by treaty or convention to territories with no intrinsic social complexity, such as Antarctica or the deep ocean seabed, or to manage states during transition, typically post conflict or colonialism. Catalunya’s contemporary state of ambiguity, described in Absolute Devolution, is not a traditional condominium: Not just because it lacks an agreed resolution, but more fundamentally because The Act of Referèndum emphasises the relative unimportance of territory.

As Lassa Oppenheim highlighted, “a state without a territory is not possible”, because since 1648 international law has followed the principles of the Peace of Westphalia, which resolved the European conflicts of the Reformation, and formalised early modern understanding of state as that territory belonging to a ruler. Any alternative notion of state, such as one that reflects its people, must be retrofitted onto a geographic territory: Westphalia’s territorial presumption is increasingly arcane, even for modern democratic, self-identifyingly European, virtually connected, Westphalia. As argued in Patria and Patrimonio, this definition of state is firmly linked to Enlightenment thinking. Spain had failed to dominate the early modern intellectual hegemony, her global dominance usurped by the Dutch, and was thus forced to internalise her social (knowledge) model within her territory and present that territory to the wider world as an absolute power, a Westphalian sovereignty. The idea of Spain, as explored in 1714 and All That, provided an appropriately robust structure – an internally liberating bouncy castle and an ilusión of the external – an external that could theoretically never be achieved.

Independence from Spain necessarily breaks the idea of Spain for that which becomes independent. In the most basic scenario – the continuation of prior societal norms as a new independent state – independence requires the idea of Spain to be cloned locally. That implies a transitional period, during which the independent state exists in the Westphalian world, but is not yet adapted to it: Catalunya risks exposure to the actual external its society had previously been protected from by the idea of Spain, and requires Catalunya to behave appropriately, to exude control, quite different from the internal bouncy castle of Spain. However, the state of ambiguity is inherently self-transitioning, since both states are simultaneous within – change does not occur at one moment, nor is the whole in flux at once. The nature of within is social, focused upon that area of social knowledge best able to readjust: So long as state remains conceived with the intensity of family, and does not fall in the void in transactional responsibility that bedevils the Spanish political state, any changes can be managed with efficacy. Thus change is through the ambiguity of both, not the objective cause and effect of a singular revolutionary act. The familiar philosophy of the idea of Spain is cloned without leaving the comfort of home, sparing much of the trauma that normally accompanies the birth of a sovereign state.

The theoretical weakness of that scenario lay in what is cloned: The idea of Spain manifests the external in the physical, a physical which apparently cannot be rendered in ambiguity, and so the independent state will tend to conflict over the same physicality as the Spanish state. However both states share the same concept of the idea of Spain, where the physical is relatively unimportant in the social model. The physical has always been the common domain in the political state, and thus the physical can also serve to counterbalance two concurrent political states: More competition than conflict, this balance of states serves the function of a Quantum ballot of the polis – both states perpetuate primarily in social simulacres, their relative support manifest in the physical. While all that may sound exotic, it is little different from the practice of many modern democratic states, albeit without the veneer of singular power. Spain is already highly developed in this regard: Its autonomic policy-making process has almost no reliance on absolute power, while its legal structure bridges a chasm between power and people, affording considerable flexibility between corpus of law and enforcement. The loss of the veneer of singular power would not primarily be a problem internally. It is simply not how sovereign states are supposed to function, and thus primarily confusing for the external.

The already highly autonomous Catalunya gains almost nothing from Westphalian independence, since the territorial state remains more-or-less the same. Little more is gained than the right to be called a nation and register a claim on Catalunya Nord. Full fiscal autonomy is moot within the monetary union of the Eurozone – greater responsibility for debt may even disadvantage an independent Catalunya. In spite of appearances, the Westphalian independence is not the type of independence sought by Independència. That confusion lay in the prior tradition of manifesting the external in the physical, which thus over-emphasises the physical, territory, in matters regarding the external. But as this sequence of essays has demonstrated, the physical is relatively unimportant to the function of Catalunya’s society. The consequent unimportance of Westphalian sovereignty allows Catalunya’s independence movement to safely deploy it as a charade – a game of perception, the demos at the heart of Independència. As an internal rebellion, Independència has no realistic prospect of success. But by embroiling the European Union, on terms which the European Union cannot readily respond, Catalunya strengthens its hand. A game hitherto played as Spain is now primed to take international law – and perhaps even the Enlightenment concept of state – by surprise.

Continue reading “The Moral of Sovereignty”