A Carrot Rebellion Underscores Spain’s Precarious Politics

The following is an excerpt from an article in:


The New York Times
Thursday, September 27, 2012

A Carrot Rebellion Underscores Spain’s Precarious Politics

By RAPHAEL MINDER

MADRID — As Spanish domestic politics threaten to spin beyond the control of the central government, they are also making it harder for Prime Minister Mariano Rajoy to meet Spain’s financial obligations to the rest of the euro zone.

Mr. Rajoy needs to replenish Spain’s coffers and convince investors and his European counterparts that his government can stick to its budget deficit targets. He will need the euro zone’s confidence if he decides to tap European bailout money for Spain’s banks or request help from the European Central Bank in controlling Madrid’s borrowing costs.

But in Spain’s most economically powerful region, Catalonia, pushing through new central government taxes could prove difficult at this point, because the regional government has set elections for November that many voters may see as a referendum on Catalan independence.

Already, collection of current taxes is no sure bet in some parts of Spain. Consider the Catalan carrot rebellion.

To avoid an increase in the value-added tax that the Rajoy government put into force on Sept. 1, a municipal theater in Bescanó, a Catalan village, has found an innovative loophole: sell carrots in lieu of entrance tickets.

Carrots are among the staple foods exempt from the tax increase, so the Bescanó theater is selling them for 13 to 15 euros each, or $17 to $19. Each carrot entitles the bearer to see a play in November.

Quim Marcé, director of the Bescanó theater, said: “The theater world was already in very bad shape, but this tax increase will basically kill off small theaters like ours. We’re perhaps pioneers, but I really think that other theaters will have to follow our example and find ways around this unsustainable tax.”

Investors have already shown renewed doubts, demanding sharply higher interest rates to hold Spanish government debt. On Wednesday, the interest rate on Spain’s 10-year bonds approached 6 percent for the first time in months, while European shares and the euro fell sharply as investors reacted to social turmoil in Spain and Greece.

On Thursday, the Rajoy government plans to present a draft budget for 2013 that is aimed at reducing Spain’s deficit to 4.5 percent of gross domestic product in 2013, from a target of 6.3 percent this year. But hitting either target depends on higher tax revenue even as unemployment and recession are sending protesters into the streets and prompting a political revolt in some of the country’s largest regions.

For more, visit www.nytimes.com.