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Fiscal Sovereignty and Nationalist Politics in Spain: the Influence of Regional Financing on the Territorial Agendas of Basque and Catalan Nationalist Parties

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Fiscal Sovereignty and Nationalist Politics in Spain: the Influence of Regional Financing on the Territorial Agendas of Basque and Catalan Nationalist Parties Fiscal Sovereignty and Nationalist Politics in Spain: The Influence of Regional Financing on the Territorial Agendas of Basque and Catalan Nationalist Parties Thesis submitted in accordance with the requirements of the University of Liverpool for the degree of Doctor of Philosophy by Caroline Gray May 2016 Fiscal Sovereignty and Nationalist Politics in Spain: The Influence of Regional Financing on the Territorial Agendas of Basque and Catalan Nationalist Parties Caroline Gray Abstract This PhD thesis investigates the influence of the regional financing systems in Spain on the evolution of the territorial agendas of the mainstream Basque and Catalan nationalist parties, the Basque Nationalist Party (Partido Nacionalista Vasco, PNV) and Democratic Convergence of Catalonia (Convergència Democràtica de Catalunya, CDC). Spain offers the opportunity to compare two different models of fiscal decentralisation and their significance for the political evolution of two contrasting nationalist movements. While Catalonia forms part of the common financing system, which gives the regions relatively limited tax-raising competences and involves substantial revenue transfers from central government, the Basque region raises almost all of its own taxes under a separate system of extensive fiscal autonomy (the Concierto Económico or Economic Agreement). At different times since the late 1990s, both the PNV and CDC have sought a fundamental reconfiguration of their respective territories’ relationship with Spain. The question posed is why the form of accommodationist politics practised by the PNV and CDC in the 1980s and 1990s has been transformed since then, leading to shifts towards pro-sovereignty agendas, which embrace a spectrum of potential projects ranging from some degree of statehood and political sovereignty within Spain through to full independence. This thesis investigates the issue of regional financing as one explanatory factor. Based on an extensive programme of elite interviews with current and former politicians and civil servants in the Basque and Catalan regions, it is argued that in both cases, albeit in different ways and to different degrees, the regional financing systems have played a fundamental role in influencing the nationalist parties’ evolving territorial agendas. These systems, and the different levels of fiscal autonomy and financial resources they provide, have influenced the timings of shifts in strategy and the prospects of one agenda or another being adopted, especially when a party is already under pressure to change. Moreover, they have often informed the very content of these agendas. Bilateral tensions with Madrid, as well as wider inter-regional dynamics within Spain, have influenced regional financing preferences; but so too have intra- regional factors such as territorial heterogeneity and/or party competition within the home region. The internal political dynamics of regional financing in each autonomous community have had different consequences for the territorial strategies and behaviour of the nationalist parties in each case. i Acknowledgements First and foremost, I would like to express my deepest thanks to my supervisor, Richard Gillespie, not only for giving me the opportunity to undertake this PhD in the first place, but also for his valued comments and guidance throughout it. I had been rather fixated for a while beforehand about wanting to do a PhD on some aspect of contemporary Spanish history and politics, and Richard gave me the perfect opportunity when this studentship arose in conjunction with his own project on nationalist movements in Spain. I am very grateful to him for involving me directly in his wider project, which included organising two workshops together and co-editing a special issue of a journal, also published in book format. In all these activities Richard treated me as a colleague and friend rather than a mere student. I also enjoyed the interviews we conducted together in the Basque region, as well as our frequent conservations, be it in person or via email, about Spanish, Basque and Catalan politics in general. I am also immensely grateful to him for his eternal patience throughout the trials and tribulations of the final write-up year. This PhD has involved extensive fieldwork in both the Basque Country and Catalonia, and my warmest thanks go to all the many interviewees who were willing to give up considerable amounts of their time to answer my questions, some of whom were also happy to meet up a second or even third time, or to respond to further queries by phone or email, as well as to provide introductions to other people I was keen to interview. They are too numerous to mention here, but a list of interviewees is provided in the Appendix. One person in particular I must however name and thank here is Pello Caballero, who was the first person I was introduced to when I landed in Bilbao, who took a great interest in my research from the outset, and went out of his way time and time again to recommend people I might want to speak to and also to help facilitate access to them, as well as to provide a friendly face in Bilbao while I was living there. I would also like to thank the wonderful group of Basque friends who took me under their wing and integrated me into their ‘cuadrilla’ as one of their own while I lived in Bilbao for nine months. They gave me a chance to explore and experience the Basque Country with them and gain a real feel for its vastly different landscapes and geographies and for life in general there. My thanks also go to Bill Murray, whose guidance I worked under at the British Embassy in Madrid a couple of years prior to starting this thesis. Having studied Spanish literature for my BA and Masters degrees, I knew very little about contemporary Spanish politics and the economy when I started to work for him, but he gave me an excellent crash course throughout the year, sparking my interest in particular in the complexities of regional politics in Spain and the intricate connection between politics and the economy, which helps to explain the origins of this thesis. I am also eternally grateful to Jonathan Thacker in the Spanish department at Oxford, who first taught me when I was an undergraduate there, later supervised my Masters on Golden Age Spain, and subsequently supported all my Spain-related endeavours thereafter. This work has been made possible financially thanks to a PhD studentship from the Economic and Social Research Council (ESRC) of the UK [ES/J500094/1], and also to the 2015 BBVA scholarship awarded by the BritishSpanish Society. I would like to thank Philip Paddack of BBVA not only for the generous award itself, but also for the interest he took in my project and the opportunity he gave me to meet and discuss my research with BBVA analysts in Madrid and London. I am also grateful to the trustees and members of the BritishSpanish Society who took an ii interest in my research and approached me to talk about it at the Scholarship Awards Ceremony at the Spanish Embassy in London in May 2015. It was a wonderful opportunity to meet so many people keen to foster Spanish-British relations. Some of the ideas contained in this thesis have been published previously in two journal articles written in earlier stages of the PhD, one in the International Journal of Iberian Studies (Gray 2014) and the other in Nationalism and Ethnic Politics (Gray 2015), the latter of which was also published as a book chapter in a volume by Routledge (Gillespie and Gray 2015). Some of the views expressed in those publications have however been slightly modified or nuanced in this thesis with the benefit of further research. As inevitably occurs with topics of a highly politicised nature, as is the case of this thesis, there is a considerable risk of potentially causing offence by not taking one side or the other. This is particularly so with research on Spain, a country where political scientists and historians carrying out academic research are often associated with a partisan stance. This study attempts to provide an analysis that spans the divide in perspectives and I hope to have provided as balanced an account as possible, taking into account the wide range of opinions expressed in interviews and other available data, but I apologise wholeheartedly in advance if any reader feels I have misrepresented any events or given too much credence to one political view over another. It goes without saying that any shortcomings in the design and content of this thesis are entirely my own doing. iii Table of contents List of abbreviations .......................................................................................... v 1 Introduction and framework .............................................................................. 1 2 Basque and Catalan nationalisms: Unravelling the drivers behind shifting party agendas ................................................................................................... 53 3 Basque and Catalan financing: The fundamentals of the Concierto and the common system ............................................................................................... 94 4 Shaping the PNV’s conception of sovereignty (1): Bilateral Spanish-Basque relations over the Concierto ........................................................................... 126 5 Shaping the PNV’s conception of sovereignty (2): The EU and the development of Basque fiscal autonomy ....................................................... 147 6 The intra-regional
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