Spain rejects Catalonia\'s bid for fiscal independence

Spain\'s Prime Minister Mariano Rajoy on Thursday rejected Catalonia\'s demand for fiscal independence, opening a potentially serious political rift in the midst of an economic crisis. Artur Mas, president of the northeastern region, which accounts for one-fifth of Spanish economic output, came to Madrid seeking to open talks for Catalonia to raise and spend its own taxes. But Rajoy, leader of Spain\'s conservative Popular Party government, did not entertain the Catalan proposal for a \"fiscal pact\". \"Rajoy showed his opposition to the proposal for an economic accord for Catalonia because it is not compatible with the Spanish constitution,\" the prime minister\'s office said in a statement. The premier told Mas that the \"very serious crisis will be overcome through joint responsibility and unity, never through division or institutional instability,\" it said. Mas said he was disappointed by the rejection, and issued a veiled threat of further response. \"The government\'s reply was frank,\" Mas told a news conference. The prime minister \"told me that there was no margin to negotiate Catalonia\'s fiscal pact.\" Rajoy was cordial but the discussion did not go as hoped, the Catalan boss said. \"We lost an historic opportunity in the understanding between Catalonia and the rest of Spain,\" he said. \"I would have liked to be able to say that there was room for negotiation but the head of government himself told me that he saw no way forward for the fiscal pact.\" Mas arrived in Madrid boosted by a pro-autonomy demonstration by hundreds of thousands of people in Barcelona last week and claiming overwhelming support in Catalonia for his proposal of greater economic independence. Catalonia feels it gets a raw deal from Madrid, providing much more to the central government than it receives at a time when it is making painful austerity cuts to health and education spending. Last month, the region had to reach out for a 5.0-billion-euro ($6.3-billion) central government rescue so as to make repayments on its 40-billion-euro debt, equal to a fifth of its total output. The Catalan leader made clear that he had no intention of letting the demand for the fiscal pact drop. \"Since it did not go well today, obviously we will have to consider this more deeply in Catalonia. We will do that,\" Mas said. \"We will have to take decisions,\" he said, adding that the matter would be taken up in the Catalan regional parliament next week during a scheduled general political debate. Several Spanish newspapers said Mas could respond to Rajoy\'s rejection by calling snap regional elections, perhaps on November 25. A straight referendum on Catalan independence is barred by the Spanish constitution, however. Spain\'s provinces gained a large degree of autonomy, including responsibility for health and education, after the 1975 death of General Francisco Franco who had centralised power in Madrid. Some regions fear Rajoy\'s conservative Popular Party may erode those powers during the economic crisis, for example by overseeing the finances of those that fail to meet deficit-cutting targets. Spanish King Juan Carlos released an open letter on Tuesday lamenting the country\'s economic pain. \"The worst thing we can do is to divide our forces, encourage dissension, chase illusions, deepen wounds,\" the king wrote, in remarks widely interpreted as a warning to Catalonia. Mas said the letter was not discussed in his meeting with Rajoy, adding that he did not feel the royal message referred to Catalonia.