The Basque Fiscal System: Learning To Be
Juan José Ibarretxe
Progress with “roots, faces and eyes”
Our world is a complex one. We face complex problems, far-reaching changes, and enormous transformations, so we need to find complex solutions. In the words of Edgar Morin, it is necessary to “manage complexity.” If that were not enough, we are experiencing a deep international crisis that is different from all those we have experienced to date. This is because of this crisis, which presents itself in many forms —legal, political, economic, sociological, environmental, cultural, etc.— is, above all, axiological.
Today, as Eduardo Galeano says, “development is a journey with more castaways than sailors.” It is the first lesson of this new era: “a market without values is a flea market” or, in the recent words of Pope Francis: “This economy kills.” F. Hayek’s concept of self-regulation has therefore been debunked. This is the first evidence, but is not the only one.
Almost everything is shrouded in uncertainty. We do not have a clear diagnosis, we do not know what is happening to us… and that is precisely what is happening to us, as Ortega y Gasset would say. In these circumstances, nothing would be more negative than returning to the situation prior to the crisis, a view that has too many advocates in the Western world, which often impatiently yearns for the old good days. Whatever has to happen will happen, but it will be new and different, not inspired by nostalgia but intellectual tension and multidisciplinary reflection —nothing can escape from rational challenge— and the search for new pathways and spaces for the encounter. This process will allow the dissemination of knowledge and thought, helping us to see the light in the distance as the exit from the tunnel and not as a train rushing towards us, as the genial and universal Basque sculptor Jorge Oteiza once said.
We now know that Culture, defined as an ensemble of shared understandings, and ongoing education are silver bridges linking politics, economics and life. In the late nineties, Baudrillard found that:
[T]he universal has had a historic opportunity. However, faced today with a world order providing no alternatives, to a globalization against which there is no recourse, on the one hand, and with the drift or tenacious insurrection of singularities, on the other, the concepts of freedom, democracy and Human Rights have grown extremely pale, as expected in accordance with their status as ghosts from a universe which has disappeared. It is hard to imagine that they might be resurrected from their ashes due to the mere game of politics, because they have also fallen victim to the same de-regulation and have no foundation other than moral or intellectual power.
On the basis of these findings, he opened a door to hope, pointing out that:
[O]ur fate has not yet been decided, though, even if nothing works for universal values anymore. The trump cards have grown more powerful, and globalization has not won an early victory. Against its dissolving, homogenizing power, everywhere we see heterogeneous forces rising, not just different, but also antagonistic and irreducible.
A great deal of time and effort has been invested in convincing us about globalization’s benefits and values. It is now also obvious that this has been an attempt to make the economy, the rules on how the market operates and, ultimately, society itself more uniform. This has all been done to favor a global culture which was to pour out benefits and wealth ubiquitously. Some even unabashedly denied —and still deny— multicultural dialogue.
Fortunately, there are societies and individuals who are not willing to accept all of these changes and transformations passively, or accept that we must renounce what we are in order to benefit what the global is meant to be. This is to be understood as a set of rules and values that end up conditioning the actions we carry out as people and role-players in modern society. Against all of this we must vindicate the idea that today it is local things which provide the real hope that another world is possible. For some time now, passive acceptance of the processes of transformation and change is starting to be rejected; instead intervention is taking over. What this means is that you must know how to complete tasks and live up to your commitments through the values contributed to you by your own culture.
Furthermore, and in relation to Basque self-government and the Basque Fiscal System —the Economic Agreements for the Basque Autonomous Community (the Concierto) and Navarre (the Convenio)— enough time has gone by and we have travelled far enough to apply the learning of Kierkegaard to our reflection, in the sense that he said life, if we are to understand it, should be observed looking backwards, by analyzing the past. However, if we are to live life, we should be looking to the future. That is what we will do in this article: learn from the past and its crises to build the future and its crises. This is Learning to Be.
I The Basque Fiscal System/The Basque Economic Agreements; “The last vestige of our revered freedoms”
What a graphic expression! “The last vestige of our revered freedoms.” This is how people in the Basque Country publicly referred —following the abolition of the fueros (chartered rights) at the end of the 19th century (1876) and later— to the recently established system of Concierto (Economic Agreement) for the Basque Autonomous Community and the Convenio (Agreement in Law) for Navarre in relation to our Fuero (Charter) and our Historical Rights.
The Charter basically had three key elements: (a) the pase foral, based on the “we obey, but we do not comply with” principle; (b) the exención militar, whereby the Basques were not obliged to do military service in Spain; and (c) the exención fiscal (exemption from taxation), which was applied in the four Basque territories with chartered status: Araba, Bizkaia, Gipuzkoa and Navarre. As we can see from several doctoral theses carried out under the excellent direction of Professor María Ángeles Larrea in this country, the history of the 19th century ends with the socio-political creation of the buenos fueros (good rights) theory.
This theory led to the removal of the political dimension of the chartered regimes in 1876, as reflected in the words of the then Spanish Prime Minister Antonio Cánovas del Castillo in a speech to the Parliament in Madrid on 7thJuly 1876. Referring to the Charters, Cánovas del Castillo said that “[t]his issue of privileges is a matter of force, which ends up being solved through violence.” He then added a famous phrase: “when force leads to a State, force becomes the law.” Basically, this was the main debate and the centralizing tendency that took place in Spain at the end of the 19th century. Its underlying intention was to remove any vestige of foralidad (regional powers) in favor of a State with single and central institutions.
Nevertheless, what was initially supposed to be a full repeal ended up with an agreement in the area of economy and taxes described by Cánovas del Castillo as a “lax approach,” even though the Basque territories’ capacity for political self-government was eliminated. That is how the agreement with the institutions of the fledgling State and the Basque Diputaciones (Territorial Administrations) took shape in the first Economic Agreement.
II Political & Cultural & Economic self-government
I would like to dedicate the second reflection to political and economic self-government, in the sense that there is no genuine self-government if there is no political self-government, i.e. the capacity to take political decisions. Obviously, real self-government is impossible without being able to manage the economy, although this does not guarantee political self-government in itself. We can affirm that Economic Agreements with the Spanish State existed from 1878 to 1979-1980 in Navarre and Álava, and until 1937 in Gipuzkoa and Bizkaia. However, there was no political self-government in any of the Basque territories, except for a short period during the first Basque Government of Lehendakari Agirre.
Self-government is not an exclusively economic notion: it is an overarching concept in political and cultural terms. The economy is obviously a very important dimension, but it is only one among many. We do not create a realpolitical personality unless we add the bones (the institutions) and the muscles (powers and functions) to the blood of the system, which is what we usually associate with the Economic Agreements for the Basque Autonomous Community and Navarre. Blood (Economic Agreements), bones (Institutions) and muscles (power base) inseparably constitute authentic self-government.
III. The link between Self-Government and the Welfare State: 1980/2018
The period between 1980 and 2018 demonstrates that self-government means welfare in an empirical way. This is what I have partly dedicated my life to, and still do, initially from the Basque political institutions and now from the Agirre Lehendakaria Center for Social and Political Studies, in which the University of the Basque Country (UPV-EHU), together with Columbia University (New York) and George Mason University (Washington) in the beginning and nowadays more academic institutions (McGill University, London School of Economics,…), are working together on several research projects. These all take “The Basque Case. A Comprehensive Model for Sustainable Human Development,” a research project I led with the participation of these American academic institutions, as their intellectual starting point.
Indeed, the direct relationship between exploring self-government in greater depth and increasing the welfare of people in Basque society is one of the subjects studied by the Agirre Lehendakaria Center. When self-government was granted in 1980, the Basque Autonomous Community had a per capita income of 3,000 euros per year (89% of average European income). This figure reached 6,000 euros in 1986, the year we entered the European Union as it was then. The figure doubled in those six years, to 90% of average European income.
By 1999 our per capita income stood at 118%, meaning that we had achieved and surpassed the average European average income figure. By 2008 we had a per capita income of 31,000 euros, i.e. 30% above the European average. The latest published data, reflects the Basque Autonomous Community is currently 21% above the European average. In 2001 we were in eighth position in the European ranking in terms of income per capita, with 120% of average European income. We jumped to fourth place by 2008 (130%). In 2017, with the economic crisis fully affecting Europe, the Basque Country was eighth in the Top 10, with 121% of average European income.
Nevertheless, we have to look beyond GDP. I stand up for Sustainable Human Development, which means not just taking the economic agenda into account but also the cultural and social agendas and, together with them, the environmental agenda. In a nutshell, a triple agenda: economic, social and environmental.
Unfortunately, economists and international agencies have not been able to measure the welfare of people. It is well-known —and accepted— that what is not measured is not improved. We are now in a new phase: what is not measured is not even part of the agenda. Professor Joseph Stiglitz expresses this very succinctly: “What we measure affects the decisions we take.”
Indeed, market and economic growth have been the key concepts handled, together with GDP. It has become not only the main parameter but almost the only one measured. As Robert Kennedy said shortly before he was assassinated in 1968, GDP (or GNP) gives us excellent information about many things, but it does not tell us anything about why life is worth living:
Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.
A. Self-government for peoples
This concern for the individual, not just for the economy, has made the study of the Basque Case appealing to leading universities around the world in the last 30 years.
Basically, the Basque People —one of the oldest in Europe— has been able to position itself at the forefront of progress in Europe despite the internal and external difficulties experienced by the Basque Country. Progress understood in a particular manner: not just economic progress but also social cohesion. Progress at the service of the people, of the community. These aspects are reflected in the next four tables, which show per capita GDP (for Basque Community and Navarra) in the EU, income distribution in the first two decades of the 21st century and the last comparative indicators of poverty and inequality for the Basque Community.
GPD per capita (PPP) by country and year (EU=100), Basque Autonomous Community
Europe top 10 rankings 
The experience of managing the current economic crisis and its devastating consequences for people shows us that self-government must be oriented, first and foremost, towards helping our citizens to make progress. We need to debunk the neo-Liberal argument that the welfare state is a burden for the economic performance of a country.
If that were the case, Germany should have a weaker welfare state than Greece, but it does not. Curiously, the countries that have a weaker welfare state (Greece, Portugal, Spain and Italy) are the ones that needed bailing out. Indeed, the countries that invest most in social services in the EU are, according to last figures published in 2019: Finland (10.259 Euros person/year), Germany (10.952 Euros person/year), Sweden (10.260 Euros person/year) or the Basque Autonomous Community (8.682 Euros person/year). They show a better economic performance than countries that invest less: Portugal (5.564 Euros person/year), Greece (5.214 Euros person/year) or Spain (6.349 Euros person/year).
In the final decades of the 20th century neo-Liberal thinking launched an offensive on a planetary scale. The credo: the market prevails, and anything that gets in its way is pushed aside. The consequence: individuals and peoples are pushed out of the social orbit.
The motto of this ideological globalization seems to be: everything for individuals and peoples, but without their participation and ownership. The data show this in an increasingly harsh manner. Reports and declarations by United Nations experts to the effect that “every five seconds a child dies in the world due to avoidable causes” should make us all feel ashamed. At the same time, studies such as those by the renowned North American linguist Merritt Ruhlen warn that of the 5,000 languages currently spoken in the world, only around 500 will continue to exist by the end of this century. He adds that one of these will be the Basque language, and clearly explains the strategy of destruction of cultures and peoples on which this globalization is based.
Therefore, we can say that the idea of the global village is not such a pretty one after all; it is ugly because it abandons its children to their fate. It is increasingly unequal and leaves the most vulnerable people unprotected in an inhuman way.
The data confirm a terrible tendency. In a report from 2014, the NGO Oxfam Intermón found that “economic inequality is rapidly growing in most countries. The world’s wealth has been divided in two: nearly half is in the hands of the richest 1% of the population, and the other half is shared by the remaining 99%”, adding, “and governments overwhelmingly serve economic elites to the detriment of everyday citizens.” In those same dates, the International Labor Organization (ILO) published the statement that “73% of the world’s population has no social protection policy.” Then in 2015, the OECD report Everyone Together: Why reducing inequality benefits us was presented in Paris. At its presentation, the Secretary General of the OECD, Angel Gurría, affirmed: “We have reached a turning point. The inequality in OECD countries has reached the highest level since statistics were first taken,” then adding, “[t]he evidence indicates that high inequality is negative for growth. The reason why political action exists is both economic and social. By failing to work on solving inequality, governments affect their countries’ social fabric and harm their long-term economic growth.” This claim is confirmed by Credit Suisse in its report from October 2018 on global wealth, when it states that 0.8% of the world’s population owns 44.8% of the planet’s wealth. And the last report published by Oxfam Intermon, in January 2019, affirms: “The fortune of the billionaires increased by 12% in the last year, that is, 2,500 million dollars a day, while the wealth of the poorest half of the world population, which amounts to 3,800 million people, was reduced by 11%.” It is no surprise that the discontent and social movements of indignation are increasingly large, with their protests to win the street on five continents.
So, the fight against inequality and in favor of people is the revolution of the 21st century. It is a revolution for human dignity. It is not a crisis, it is the I don’t love you anymore sentiment that appeared on a protester’s poster recently. Indeed, institutions such as the World Economic Forum recognize that “inequality is affecting social stability within countries and represents a threat for security on a world scale.” Even the International Monetary Fund (IMF) —which came up with so what if people are not doing well if the economy is going well?— recognizes “that reducing inequality helps to achieve faster and more sustainable growth.” I agree with the Spanish poet Luis Garcia Montero when he recently said: “I don’t believe in a theoretical project that is not based on a sentimental commitment to the happiness of others.”
IV The negotiation of the Economic Agreements for the Basque Autonomous Community and Navarre: 1996-2002
The Spanish opposition to reforming the Economic Agreements aggravates the non-fulfilment of the Statute of Autonomy obtained in 1980, and, together with this, creates a great need to adjust our legal and economic status to the new policy framework of the European Union. We should not forget, moreover, that 60% of present Basque citizens did not participate in the decision to approve Basque self-government, either because they had not been born or were not of voting age. The brilliant politician Thomas Jefferson once said that every generation should have its own Constitution, and I am closer to that principle than the idea of not modifying the Constitution, an argument that presides the fossilized political debate in the Spanish State.
The ruling Spanish political forces argue that the current Constitution cannot be modified due to the complexity and implications of the procedure, but in fact the Spanish Constitution was modified in a hurry in 2011 following pressure from the Troika to ‘rescue’ Spain through the incorporation of the control of the State’s fiscal deficit into the Constitution. This constitutional reform, carried out by a fast track procedure, completely debunks the political argument that the Spanish Constitution is untouchable, unchangeable and immutable. The reality is that the European Union was not foreseen in the Spanish Constitution, the Statute of Gernika or the LORAFNA when they were approved, nor in the Economic Agreements for the Basque Autonomous Community and Navarre. This means that we have not been able to carry out what, in my opinion, is essential and vital for the development of our political and economic self-government in the 21st century.
The fact is, we are witnessing ongoing non-compliance with the Statute of Gernika, not just as a consequence of the recentralizing trend of the Spanish Government but also due to the sectorial laws approved by the Spanish Parliament. These new laws invade areas of competence that correspond to the Basque institutions. Furthermore, a large number of powers and functions that are extremely important for our country, such as the economic regime for Social Security, employment policy, lifelong and vocational training, etc. —all specifically stated in the Statute of Gernika— have even been declared unconstitutional by the official doctrine and without distinction by all the Spanish Governments of recent years, be they of the Popular Party or the Socialist Party.
The questions are very simple: Is it possible to develop new policies and actions within the European Union without having the powers to regulate official education in the areas of vocational training and lifelong training? Is there anyone who can design effective employment policies if they are disconnected from the Social Security overarching strategy? These are powers envisaged in the Statute of Autonomy but never recognized.
This same lack of respect towards Basque self-government by the Spanish institutions also occurs in relation to the Economic Agreements for the Basque Autonomous Community and Navarre.
I took an active part in the negotiation of the Concierto in 1996-1997 as vice-President and Treasury Minister of the Basque Government, and also in the negotiations in 2002, by which time I was Lehendakari (President). Vice-President Idoia Zenarruzabeitia played a major role in this process, and we negotiated something that seemed to us to be fair but almost impossible… if only it had not been for the need of the Spanish political parties to receive our parliamentary support in Spain. This negotiation process became the main driving force that has enabled the development of Basque self-government, by adapting our Economic Agreement system in the Basque Autonomous Community. Later, the agreement for Navarre (the Convenio) was also adapted following the same criteria.
Our aim was to negotiate and achieve the capacity to carry out fiscal policy in similar terms to any other European Union country before entering the third phase of economic and monetary union, knowing that monetary policy had already been transferred to the European level.
There were other issues in the negotiation, although basically we wanted to achieve three things:
- Collect all the taxes generated in the Basque Country (income tax, corporate tax, and indirect taxes on consumption e.g. VAT)
- Hold legislative powers in the field of direct taxation
- That the Basque institutions should pay a Cupo (quota) to the Spanish Treasury on an annual basis (as a result of collecting all taxes in our territory from 1997 onwards) and not the other way round, as was about to happen in 1996. The sum to be paid by the Basque Autonomous Community to Madrid went from less than 3 million euros in 1996 —calculated on 2,852 million euros— to more than 700 million euros in 1997 (on 739,875 million euros) and reached over 1 billion euros in the first years of the 21stcentury (1,494,055 million euros in 2006, the last year with a definitive share, due to the fact that the sums since 2007 are awaiting approval by the Joint Commission of the Economic Agreement). This issue has enormous strategic importance from a political and economic point of view.
However, and despite these magnificent agreements —we can effectively speak of new Economic Agreements for the Basque Autonomous Community and Navarre from 1996 onwards— the attitude of all the Spanish governments has been highly disloyal, not only with regard to political self-government (as we have seen) but also vis-à-vis the economic self-government agreed in the Economic Agreements for the Basque Autonomous Community and Navarre. The most serious problem we have found is that national taxation regulations are considered measures of a general nature, while ours (challenged time and time again before ordinary and European courts by the Spanish State and other Spanish institutions) ended up being considered as State aid. If these problems are not solved, the Economic Agreements for the Basque Autonomous Community and Navarre will not only have essential support taken away from them, they will almost be left without any support. If we do not achieve direct participation by the Basque institutions in the ECOFIN system and do not succeed in getting our legislation to be considered as measures of a general nature —just like in any other EU country— the Economic Agreements for the Basque Autonomous Community and Navarre, and their economic self-government as a result, will disappear as a consequence of them constantly challenged at the European level.
It should also be pointed out that these systematic attacks by the Spanish Government on the Economic Agreements with the Basque Autonomous Community and Navarre, and the Basque institutions’ efforts to ring–fence them, go back a long way. This is not something that has emerged recently, it is the ‘political game’ we have had to play against our will since the end of the 19th century. Even during the dictatorship of Primo de Rivera (1923-1930) there were attempts made to devaluate our Ekonomi Itunak. Look at this phrase, literally taken from an encyclopedia of a well-known Spanish publishing house. It reads: “In the Government of civilians formed in 1925 the young Treasury Minister José Calvo Sotelo excelled himself by saying that ‘the State’s position in the economic agreements reached with the Basque Country and Navarre improved, to the detriment of the latter. . . .’.” This is the doctrine that has become official in Spain in recent times. The Economic Agreements for the Basque Autonomous Community and Navarre —as they are slyly reported to Spanish public opinion— are not a right but a privilege for the chartered territories. Any Minister of a Spanish Government who negotiates against them or achieves cuts to the self-governing capacity of the Basque Country is almost considered a hero, and among his or her main virtues future Spanish encyclopedias will refer to the honorableefforts aimed at weakening the Basque Country and Navarre.
V The Basque Fiscal System/The Economic Agreements for the Basque Autonomous Community and Navarre: a model for a European Union in crisis
We need to learn from the past to build the future. As Edgar Morin said: “Europe is in crisis because there is no political unity.” The background is also political here, as is the case with the Economic Agreements for the Basque Autonomous Community and Navarre, and that background is none other than the lack of unity. The Program for Europe 2020 states: “Only a united Europe can get us out of the impasse we find ourselves in.” The Europe 2020 program provides the remedy by stating that “we will not get out of the impasse because we are not a united European political space”.
From that point of view, I believe that Europe does not know —or even worse, does not want to know— that the Economic Agreement model for the Basque Autonomous Community and Navarre is a good one for Europe in order to make progress in the realm of political union, beyond the economic short-cut of a single market. The Economic Agreements for the Basque Autonomous Community and Navarre constitute an innovative legal-political-economic-financial instrument that can be exported to Europe, not just something to be settled in the EU.
The negotiation of the Economic Agreements for the Basque Autonomous Community and Navarre between 1996 and 2002 made progress in the process of harmonizing indirect taxes and their collection, with an adjustment to the level of consumption. In this respect, the transposition of the Concierto to Europe would also enable us to solve the shameful matter —which, strangely, is almost ignored— that we have had a provisional VAT system in force since 1993. More than twenty years with a provisional system, one that turns the basic objective of VAT on its head from the point of view of treasury theory: the tax should be collected at source and not at destination.
Secondly, this new Economic Agreement for the Basque Autonomous Community and Navarre is a model that should also be exported in relation to direct taxation. Why? Because what occurred was recognition of the capacity of Basque institutions to not just establish direct taxes within certain ranges that ensure an effective overall tax burden equivalent to that in force in the [Spanish] State. Europe could perhaps consider the need to establish a clearing house that would adjust the collection of these tax concepts to income.
I sincerely believe that the Economic Agreements for the Basque Autonomous Community and Navarre are a good model for this EU in crisis. The result? A Europe-wide monetary and fiscal policy with increasing harmonization of indirect taxation and the ability of member states to collect direct and indirect taxes, regulate direct taxation within certain parameters, and develop budgetary policies on account of their capabilities as a result of the responsible management of all these factors. Basically, this means fiscal co-responsibility: if you manage well and responsibly, you will have more resources. That is precisely the philosophy behind the Economic Agreements for the Basque Autonomous Community and Navarre.
VI The future of Basque self-government and the Basque Fiscal System: the Economic Agreements for the Basque Autonomous Community and Navarre in 2030
Without any doubt, the new model of self-government needs to come from a new model of governance, based on the establishment of one’s own and differentiated project. This is what makes a difference in the modern world: the ability to establish one’s own project and to develop one’s identity, not through confrontation but through cooperation with other identities nearby and in the wider world.
Our experience shows that the political will to take our own (and differentiated) decisions, linked to a real ability to carry them through, have precisely been the key differentiating factors in the Basque strategy. This is a living example of the fact that, as Professor Stiglitz states, the countries that take on their own destiny are the ones benefitting most from globalization.
This is the case, in my opinion, because the great paradigm change of the 21st century is that we have moved from choosing to being chosen. Nowadays we are elected on the basis of what we offer. As a result, we will be chosen depending on the project we are able to define and carry out here —by the Basque people— within Basque society. This leads us to a debate that is currently intensifying in the political world, in terms of yes or no to independence. As Shakespeare said: “We know what we are, but not what we could be.”
As a society, we need to hold a debate on this model of dependence, one that is becoming increasingly solid. In other words, from the point of view of the educational model of the laws produced in the Spanish Parliament, is being independent a good or a bad thing? What about the Civil Service Law, or the laws on Social Security and the management of its economic system? Or those referring to taxation, budgeting and public deficit, or healthcare, industrial policy and R&D+i?
If the present model of dependence on Spain is perceived by a majority of Basque society as a bad one, that is devastating our self-government and stops us from walking our own path in the globalized world, we need to choose another model. We do not know what our ultimate fate will be, but we do know that it will have to be democratically decided here in the Basque Country. We know what we have to change and what is needed to make progress, because the basis on which the world is now being constructed lies in the following concepts: identity and innovation, in other words, roots and wings. You cannot be in the new world without roots, you need an identity to be able to present something different that is yours, and wings to innovate, to teach people skills and reach out to the rest of the world.
Pope Francis recently said that: “globalization that enriches is like a polyhedron. Every side is connected but each one conserves its particularity, its richness, its identity”, and he added that “Globalization understood wrongly —the present one— is like a sphere: all its points are equal, all equidistant from the center.” I agree. This is the real dilemma of our time: to be a sphere or a polyhedron. I have no doubts about my choice: a polyhedron.
In the Global Society we need, more than ever, a local response, one that is our own and differentiated. Our roots, culture, way of learning things, teaching methods, ways of dealing with problems… and being serious when it comes to solving them, not mortgaging the future of the generations to come, together with a long list of other points, are the differential factors we have in the world, where capital, raw materials, technology and new devices continue to appear at an amazing pace. We need to compete using our roots. We need to innovate with our roots… and to do this, we need to have the necessary and sufficient capacity for self-government to take the decisions that suit us best.
This quite simply means that the Basque Country, with the same level of independence-dependence that other European Union countries have, would not only be very viable but, in my opinion, highly advisable. The Basque Country´s main problem in its relationship with Spain is not the media-driven debate on an independence that we do not know about, but the deeper debate on the obligatory dependence that we know and suffer in areas such as monetary, fiscal, legal, education, healthcare, employment, Social Security policy, etc. More than ever, we need our own differentiated project, one that shows solidarity with Spain, France and Europe but is as committed and differentiated as that of any other country in the European Union.
A. Economic Agreements for the Basque Autonomous Community and Navarre 2030
As a result of all this, and of the lessons learned from our experience and the new, unequal and complicated world the EU in crisis is operating in, we are called upon to ensure that this new Basque self-government should also have New Economic Agreements for the Basque Autonomous Community and Navarre to take on at least four main challenges around 2030:
The relationship between government and financial markets
Models of this relationship have changed worldwide. Until recently, governments had close relationships with the people who controlled the means of production. This has changed, and the relationship —increasingly vital in the search for development at local level— is now between governments and the financial markets.
It is necessary to emphasize this, because it is something we have not been able to negotiate and incorporate into our self-government practices —as all of us who have negotiated with Spanish institutions would have liked to see—, first of all in our Statutes of Autonomy and then in the changes made to the Economic Agreements for the Basque Autonomous Community and Navarre, no doubt due to systematic refusals from all the Spanish Administrations. The time has now come to redress the situation, however. A New Basque Political Statute was formally put forward and approved by an absolute majority of the Basque Parliament in December 2004; today, it remains an unresolved issue.
Channeling of Local Savings towards Local Projects
In the Basque Autonomous Community we are currently in the middle of a process of debate and definition —one that will be a determining factor in relation to our society and its future— of a Basque model of financial design. It should be said that there are original sins involved from the outset, for which we all have responsibility. I sincerely believe that we did not get it right when designing the project and its alliances, probably because we did not realize the importance of channeling local savings towards local projects. This is particularly the case for a country that saves hard, like ours; a country with one of the highest proportions of the productive sector in its economy in Europe.
The future use we make of the Economic Agreements for the Basque Autonomous Community and Navarre to achieve this objective is crucial, particularly in the Historical Territory of Navarre, where the process of the political-financial dismantling of the Caja de Ahorros de Navarra (CAN) has been scandalous. This is happening with a financial sector –including our own– that is increasingly depersonalized, shows a lesser commitment to the territory and lower involvement in local social initiatives. The process could lead us to be like a ship without sails that either ends up in a port or stranded on a beach, depending on which way the wind is blowing that particular day.
In Spain, within the context of a full financial crisis, and surely to redeem the sins committed, it was said that if the country were bailed out by the EU “the blame for everything could be laid at the door of the Cajas de Ahorros.” The truth is that this argument was correct to a certain extent, in the light of the abuses committed in these entities all over Spain. However, other European countries have not done the same; indeed, quite the contrary. Just look at how Germany channels local savings towards local projects, and how it protects its savings banks. They did not go for the easy option and blame the savings banks for all the problems in the economy. Exactly the opposite happened in Spain, and the savings banks have borne the brunt of the Troika’s reprimands.
We do not all behave in the same way, however. The Basque savings banks’ solvency ratings are completely different from those of our southern neighbor, as seen in the recent Stress Tests on the banks organized by the ECB in 2018. In order to rescue them, we wonder if it would have been possible to set up a differentiated model from the one we are told is inevitable, due to the bad company of irresponsibly managed Spanish savings banks and the commitments made to the EU (naturally, without our acquiescence) by Spanish institutions. Time will show us the successes and the mistakes
Financing: a ‘new’ model of bank intermediation
The third challenge is related to financing, and the extent to which it could facilitate the intelligent use of the Economic Agreements for the Basque Autonomous Community and Navarre. In a country with an industrial base, either you channel the financing of your productive structure or you are in trouble. The present model of bank intermediation is no longer useful, nor are the systems we have to evaluate risk; we need to change them. A good example is the financing paradox experienced since the crisis of the sub-prime loans in 2007. In the past the banks lent you money even if you did not need it, but now you have to prove to the bank that you ‘do not need’ the money they are going to give you a loan for.
A serious budgetary policy: relaxing the deficit
Finally, the fourth challenge: If we carry out a serious budgetary policy we would not need to apply a fundamentalist vision to the public deficit. This vision is, unfortunately, very much in vogue in Europe, which has not understood that the economic history of the world is full of examples (the USA, Japan, etc.) in which cutbacks without incentives end up creating heart attacks in the economy.
To make matters worse, as we have seen earlier in this article, those EU countries that have invested most in people have had to bail out those who spend less on them. The pitiless cutbacks in social expenditure in the latter —especially in education, innovation and public healthcare— are seriously compromising our future. What is worse, the future of young people in our countries is a much bigger problem than the debts we have accumulated.
Indeed, the cost of money is not paid solely on the basis of debt issued but not repaid, nor on the basis of the annual public deficit. You pay on the basis of how you are using the money you borrowed. In other words, whether you are able to generate public savings through a serious budgetary policy, as in any family, trying to get to the end of the month with money still in your pocket. In this respect, I agree that we should we be extremely strict in relation to the need to generate public savings, and that we should pay current expenses with current income. Nobody needs to tell us this, not even by Germany or the Troika.
One finer point: if a country had to pay for sums it has borrowed but not returned, the country that would have to pay the most would probably be the United States (a country, by the way, that rejects the sacred status of the deficit and is making a notable effort in public investment to drive areas related to innovation). In fact, until almost the end of 2012 Germany and other EU countries had a lower level of current debt (in terms of GDP) than Spain, although Spain has paid interest at a much higher rate than them during the most critical years of the crisis.
Basically, you need to be very sure that you can borrow money to buy a house or a car, although I personally would not do this to go on holiday. However, you cannot ask for a loan every Friday to go the supermarket and buy food. Having said that, I am also convinced that we need to eliminate the sacralization of the notion of zero deficit. It is about marking out what we are going to use the borrowed money for, to try and ease the notion of deficit and, in my opinion, boost public healthcare and training, and in particular, anything to do with innovation. These are transcendental issues. This is particularly applicable to the Basque Autonomous Community, which, according to the latest published data, has lost its position in the European average for R&D+i in 2017 —an investment of 1.85%/GDP in the Basque Autonomous Community as opposed to 2.07% in the EU— after reaching and surpassing the European average since 2008 following a creditable effort sustained over thirty years.
We are witnessing continuous cutbacks in education/training, innovation and the fight against inequality. Even so, these recipes do not seem to satisfy the markets (which are behaving obscenely) in order to drive economic growth and employment or to help the thousands of people out on the streets looking for a decent job. It is clearly an option for ignorance, something that the intelligent use of the Economic Agreements for the Basque Autonomous Community and Navarre —distancing ourselves (politely and affectionately) from the erratic budgetary policy of the Spanish State and walking our own path— should allow us to redress in the future.
Conclusion: Learning to Be; R&D+i+K
The conclusion of this work is that the hopeful vision for the Basque People is enshrined in this formula: R&D+i+K (Research & Development+Innovation+Culture). This, in the knowledge that magical recipes do not exist in our world. The bad economists are those of us who, regardless of the place and time, apply recipes. When we run out of ideas, we apply recipes. This does not usually work unless we adapt them to our culture, which is our own and different, and also makes our solutions our own and different.
We can learn from the successful experiences applied in other countries around the world in relation to the first part of the formula (R&D+i), although the entire polynomial will not work if we do not include the k, the cultural element. Another reason, because there is no other way, is that either you incorporate your k, your identity, your way of being and doing things, your knowledge, your ability to innovate… or nobody else will do it. Reaching out to the world without forgetting your roots is the way forward.
Nowadays, in this global society it is the local element that enshrines the real hope that another world is possible. We have gone from the old paradigm of the global cancels out the local to a new one: local moves the world. For some time now, people have started to not accept processes of transformation and change passively; rather, they get involved in them. It is not accepted, quite rightly, that modernity comes from outside.Against the catastrophic vision of Immanuel Wallerstein regarding the individual in search of his/her identity, “an identity embedded in an elusive concept called culture or, to be more precise, cultures,” we are now seeing, as F. J. Caballero Harriet claims, the return of cultures, not just from a social and political angle, but also from an economic perspective. In other words, do what you know, but incorporate new knowledge, new technologies… starting over every day, innovating… innovating with values, innovating with roots. That is, resisting to the capitalist economic order, the capitalist cosmos of Max Weber, a new way of understanding progress. The way for the future therefore lies in innovation based on values, and we can only innovate in this way by maintaining the ethics of our roots. In other words, knowing how to see things through to the end and fulfilling our commitments, based on the values that our culture gives us.
In this sense, the words of Pope Francis in the European Parliament in November 2014 are particularly gratifying and healing:
The motto of the European Union is United in Diversity. Unity, however, does not mean uniformity of political, economic and cultural life, or ways of thinking. Indeed, all authentic unity draws from the rich diversities which make it up. . . . I consider Europe as a family of peoples who will sense the closeness of the institutions of the Union when these latter are able wisely to combine the desired ideal of unity with the diversity proper to each people, cherishing particular traditions, acknowledging its past history and its roots, liberated from so many manipulations and phobias.
He then addressed MEPs in the following terms: “Dear Members of the European Parliament, the time has come to work t bogether in building a Europe which revolves not around the economy, but around the sacredness of the human person, around inalienable values.”
Finally, in the knowledge that we are living in a new world order that is ever more interconnected (and leads to a new form of marginalization: unconnected people, for whom we do not have a solution) in which the main change of paradigm is that we have gone from choosing to being chosen. Nowadays, all of us (countries, universities, individuals…) are chosen on account of what we offer.
Therefore, in the connected society the objective is not knowing, but understanding. Learning to Be. Creativity does not consist of seeing the same thing, but thinking up something different. To be able to think up something different, it is essential to have R&D+i, but also —and above all— the K factor, which becomes the core element of reflection, and with it, self-government and its fiscal instruments, the Economic Agreements for the Basque Autonomous Community and Navarre among them, at the service of the people and the individuals that make up society.
Notas Al Calce
* Economic Agreements for the Basque Autonomous Community and Navarre, because this reflection aims to offer a wider vision –of the Basque people– than the ‘compartmentalized’ one usually made of the self-governing regions of the Basque Autonomous Community and Navarre, and therefore of each region’s Economic Agreement with the Spanish State. It is a vision that incorporates a variant of a cultural nature: the “K” for culture, i.e. our own identity as a people.
** Director of the Agirre Lehendakaria Center for Social and Political Studies.
 Edgar Morin, El método: La naturaleza de la naturaleza 436 (1981) (“From now on I am convinced that any knowledge that is simplified, and therefore mutilated, is mutilating and becomes a manipulation, repression, and devastation of reality, from the moment when it is converted into action, and particularly in political actions. Simplified thinking has become the barbarity of science. It is the specific barbarity of our civilisation. It is the barbarity that now joins up with all the historical and mythological forms of barbarity”).
 Eduardo Galeano, Las venas abiertas de América Latina 224-363 (2005) (at 363, he writes: “Underdevelopment is a not a phase of development. It is its consequence”, at 323, “In each country the international system of dominance country is repeated”, at 234, “The entry of Latin America in the British orbit, which it only left to join the North American orbit, took place within this general framework, and in it the dependence of the new independent countries was consolidated”, at 234 no.23 he quotes Karl Marx, Discourse on the new change, in the Poverty of Philosophy (“It is not at all strange that the free-marketers are incapable of understanding of how a country can get rich at the expense of another, because nor do those same people want to understand how one class can get rich at the expense of another within a country.”)).
 Eduardo Galeano, Las venas abiertas de América Latina 224-363 (2005).
 Holy Father Francis, Evangelii Ggaudium, Exhortación Apostólica §53 (2013) (“As the commandment ‘thou shalt not kill’ imposes a clear limit in order to guarantee the value of human life, we now have to say ‘no’ to an economy of exclusion and inequality… that economy kills”).
 On this question, see Friedrich Hayek, Derecho, legislación y libertad 75-108 (2da ed. 1988).
 Jean Baudrillard, Pantalla total 183 (2000).
 Jean Baudrillard, Del antiterrorismo a la guerra. La violencia de la globalización, Le Monde Diplomatique, November 2002, at 17 (“the West’s mission (or rather the former West, because it has not had values of its own for a long time now) is to subject the various cultures to the ferocious law of equivalency by all means possible. (…). The creation of a world system is the result of tremendous envy: that felt by an indifferent, low-definition culture of high-definition cultures –those felt under disenchanted systems lacking the intensity of high-intensity cultures–.”).
 David Osborne and Ted Gaeblre, Reinventing Government: How the entrepreneurial spirit is transforming the public sector 62-66 (1995) (reflects on the following: “smaller, but stronger,” pointing out that “communities enjoy good health when their families, neighborhoods, schools, volunteer organizations and businesses enjoy good health, and they also know that, in order to achieve this, the government’s essential role consists of taking the helm at these institutions (…) being the catalyst which helps these communities strengthen their civil infrastructure. (…). The governments which focus on remaining at the helm give form to their communities, States and nations. They reach more political decisions. They put more social and economic institutions into motion. Some even practice more regulation. (…) there is a greater demand for managing government, or in other words, ‘driving society,’ convincing the various interest groups to take on common goals and strategies.”).
 Sören Kierkegaard, Diario íntimo (1993).
 Rafael María Mieza Mieg, Origen del Régimen de Concierto Económico y Administrativo 5 (1983) (“Once the power of the bourgeoisie had consolidated in the State of the Restoration and the second Carlist war had been won, Cánovas’ project of imposing his personal interpretation of the ‘constitutional unity of the monarchy’ by force took shape. Given the enemies that his efforts created, even among the ruling classes in the three Provinces, Cánovas del Castillo put forwards a lax taxation system (quotas established by mutual agreement, and their collection would be up to the provincial administrations, and also the determination of the tax concepts that could be used) if they worked on quelling the atmosphere of social tension. This would lead to public references to the recently-established system being made by always adding the qualifying term of ‘the last vestige of our revered freedoms´”.).
 The functioning of the ‘Pase Foral’ is commonly referred to in these terms.
 The fuero bueno (‘good charter’) was considered not to have political content but maintained the economic content to keep the economic elites happy. This is reflected in the thinking of Rafael María Mieza y Mieg when he says: “… doing without the political aspects of the Charter (capacity for self-government, the constitutional nature of the charter in that it was binding on Kings/Lords, and the possibility of applying a ‘chartered territory’s veto’: the ‘Pase’ or ‘Uso’), but it safeguarded the aspects of fiscal and internal administration independence”, Mieza y Mieg, supra note 9, see also at 3 (“From the last day of the Carlist war (1839) in Euskal Herria (initially timidly but later more strongly), the appearance of an intermediate way took place that affirmed the convenience of keeping a part of the Fuerosbut doing without other. This is the theory of the Buenos Fueros, defended in the Spanish Parliament by the representative for Guipúzcoa Claudio Antón de Luzuriaga, later argued by the commissioners of the Diputación Provincial of Navarre in their discussions with the Regency Ministry of Espartero. It ended up in the Law on the Charter of Navarre –the inappropriately called ‘Pact Law’ of 16.8.1841.”).
 Antonio Cánovas del Castillo, Spanish Parliament, Sessions Diary, Legislature 1876, Madrid, 7.7.1876, no. 103.
 Basque President.
 University of the Basque Country.
 Juan José Ibarretxe, The Basque Case: A comprehensive model for sustainable human development (2012).
 European Commission, Eurostat (Aug. 2,2018), https://ec.europa.eu/eurostat; Instituto Vasco de Estadísticas, Eustat (Feb. 20, 2019), https://www.eustat.eus/indice.html.
 European Commission, Eurostat (Aug. 2,2018); Instituto Vasco de Estadísticas, Eustat (Feb. 20, 2019); and own elaboration.
 Joseph Stiglitz, Amartya K. Sen, Jean-Paul Fitoussi, The measurement of economic performance and social progress revisited: Reflections and Overview, 2009. hal-01069384
 Robert Kennedy, Remarks at University of Kansas (Mar. 18, 1968).
 It is about the notion of AUZOLAN: to clarify this Basque term, we can say that AUZO means neighbourhood, a physical (and above all) social and community unit. LAN means work, so AUZOLAN is work done by everyone for the good of the neighbourhood and to the benefit of the whole community. It is the basis for communal work in the farmhouses, hamlets, councils, villages and communities in the Basque country, and has been considered the basis for the original way of understanding work that takes the form of the Basque cooperatives.
 European Commission, Eurostat (Aug. 2,2018); Instituto Vasco de Estadísticas, Eustat (Feb. 20, 2019); and own elaboration. *1999, Directorate of Economy and Planning, Department of Direction and Public Administration of the Basque Government.
 Instituto Nacional de Estadísticas, Government of Navarre, Eurostat (Mar. 21, 2019).
 Basque Government, Department of Employment and Social Policies, Survey of poverty and social inequalities, Eurostat (Jul. 16, 2019).
 Basque Government, Department of Employment and Social Policies, Survey of poverty and social inequalities, Eurostat (Jul. 16, 2019); and own elaboration.
 European Commission, Eurostat (Jan. 24,2019); Instituto Vasco de Estadísticas, Press release, Eustat (Feb. 14, 2019); and own elaboration.
 European Commission, Eurostat (Jan. 24,2019); Instituto Vasco de Estadísticas, Press release, Eustat (Feb. 14, 2019); and own elaboration.
 J. Cardona, United Nations expert, Panama City, October 2014; See also Jeremiah Rodriguez, Every fice seconds, a child dies from preventable causes: UN report, CTV News (Sept. 18, 2018, 1:32 PM), https://www.ctvnews.ca/world/every-five-seconds-a-child-dies-from-preventable-causes-un-report-1.4098950.
 Merritt Ruhlen, Department of Anthropological Sciences, The origin of languages; an interview with Merritt Ruhlen, Stanford University, May 2009.
 OXFAM Intermón, Gobernar para las élites: Secuestro democrático y desigualdad económica (2014).
 International Labor Organization, World Social Protection Report (2014).
 Organisation for Economic Co-operation and Development, In It Together: Why Less Inequality Benefits All (2015).
 Credit Suisse, Global Wealth Report 2018 (2018).
 OXFAM Intermón, Bienestar público o beneficio privado (2019).
 World Economic Forum, Perspectivas de la Agenda Mundial 2014 (2013).
 International Monetary Fund, Redistribution, Inequality, and Growth (2014).
 Luis García Montero dice que “ninguna ideología puede funcionar al margen del amor”, Agencia EFE, (Feb. 14, 2015), https://www.efe.com/efe/espana/cultura/luis-garcia-montero-dice-que-ninguna-ideologia-puede-funcionar-al-margen-del-amor/10005-2537109.
 1 Letter from Thomas Jefferson to James Madison, The Founders´ Constitution (Philip B. Kurland & Ralph Lerner eds., 2001) (1789), available at http://press-pubs.uchicago.edu/founders/documents/v1ch2s24.html (“no society can create a perpetual constitution, not even a perpetual law. The land always belongs to the living generation . . . . Any constitution, therefore, and any law, naturally expires after 19 years. If it is maintained for longer it becomes an act of force and not of law . . . . Each generation is independent of the previous one, just like the present one is. It has, therefore, the right to choose for itself the form of government it feels best promotes its own happiness.”).
 The World Bank, the International Monetary Fund, and the European Union.
 Ley Orgánica de Reintegración y Amejoramiento del Régimen Foral de Navarra (B.O.E. 1982, 195).
 Órgano de Coordinación Tributaria de Euskadi, Comprehensive Annual Report on the Basque Treasury 2012 (2014).
 Diccionario Enciclopédico Espasa 997.
 Lluís Uría, “Debe decrecer la economía del despilfarro”, La Vanguardia (Feb. 17, 2012, 1:00 PM), https://www.lavanguardia.com/magazine/20120217/54255816057/edgar-morin-stephane-hessel-el-camino-de-la-esperanza-crisis-economia-sociologia.html.
 European Commission, Understanding the policies of the European Union, EUROPA 2020: the European strategy for growth (2013).
 Joseph Stiglitz, El malestar en la globalización 309 (2002) (“The globalization of the economy has benefited the countries that have taken advantage of this opportunity to open up new markets for their exports (…) But the countries that have benefited most are those that took charge of their own destiny and recognized the role the State can play in development, without trusting the notion of a self-regulating market that solves its own problems”.).
 William Shakespear, The Tragedy of Hamlet, Prince of Denmark act 4, sc. 5.
 Henrique Cymerman, Entrevista al Papa Francisco: “La secession de una nación hay que tomarla con pinzas”, La Vanguardia (June 12, 2014, 10:00 PM), https://www.lavanguardia.com/internacional/20140612/54408951579/entrevista-papa-francisco.html.
 Savings banks.
 European Central Bank, SSM-wide Stress Test 2018 (2019).
 European Commission, Eurostat (Oct. 21,2014): Public debt in % of GDP per country and year, 2012: Spain 84.4%, Germany 79%, United Kingdom 85.8%, or France 89.2%.
 Eurostat & Eustat, Statistics on scientific research and technological development in the Autonomous Community of the Basque Autonomous Community (R&D) (Nov. 11, 2018).
 David Osborne & Ted Gaebler, La reinvención del gobierno. La influencia del espíritu empresarial en el sector público62-66 (1995) (reflects on the “smaller, but bigger” issue, pointing out that: “communities are in good health when their families, neighbourhoods, schools, volunteer organizations and companies are in good shape, and they also know that, to achieve this, the essential function of the government is to take the helm in these institutions (…) be the catalyst that helps communities to strengthen their civil infrastructure. (…). The governments that focus on taking the helm give form to their communities, States and nations. They take more political decisions. They get more social and economic institutions moving. Some even regulate more. (…) There is a greater demand for government management, i.e. ‘’driving’ society, convincing the different interest groups to embrace common goals and strategies”.).
 Amin Maalouf, Identidades asesinas 88-91 (1999) (reflects that in any corner of the world ‘modernization’ means ‘westernization’ and states: “The people who are born within the dominant civilization and those born outside it do not experience the reality in the same way. The former can transform themselves, make progress in their lives and adapt without losing their identity (…). For the rest of the world (…) modernisation has always meant leaving a bit of yourself behind. Even when it has aroused enthusiasm, the process has never taken place without a certain bitterness, without a feeling of humiliation and denial. Without a painful interrogation on the risks of assimilation. Without a deep crisis of identity. (…). If people find disappointment, disillusion or humiliation in each step they take in life, how is their personality not going to be bruised? How are they not going to feel that their identity has been bruised?”.).
 Immanuel Wallerstein, El futuro de la civilización capitalista 91-92 (1997) (“The new geo-cultural issue has been proclaimed: it is the issue of identity. (…) We can expect explosions in all directions”.).
 Francisco Javier Caballero Harriet, Algunas claves para otra Mundialización 196-97 (2009) (“We need to accept that the return to ‘cultures’ does not mean a clash of civilizations (…), the return to ‘cultures’ cannot be understood as something tragic and regressive in the process of maturing and freeing the individual throughout history, rather a return to the axiological reservoir in which a person can rediscover the identity lost after the frustrated illusion of not achieving absolute individual freedom in a world in which universal values finally ended up being the chains of the market”.).
 Max Weber, La ética protestante y el espíritu del capitalismo 49 (1989) (“an extraordinary cosmos in which the individual is born and which, at least as an individual, has provided a practically unreformable building to live in, on which the rules of its economic behaviour are imposed, in the sense that it is involved in the weft of the economy”.).
 On the idea of progress, it is interesting to read Robert Nisbet, History of the Idea of Progress (1980).
 Address of Pope Francis to European Parliament, The Holy See (Nov. 25, 2014), http://www.vatican.va/content/francesco/en/speeches/2014/november/documents/papa-francesco_20141125_strasburgo-parlamento-europeo.html.